Gold prices inched up on Monday after slumping more than 1 percent in the previous session as some bargain hunting, better demand from Jewelers in Asia and firmer euro lifted the demand for the precious metal; nevertheless, bullion investors are expected to tread with caution ahead of Federal Reserve’s policy statement, slated to be released on Wednesday. Earlier on Monday, the metal found a strong support as prices started to drift towards $1,700 an ounce level. While bargain hunting provided some boost to bullion prices, uptick in demand from Indian Jewelers in the wake of upcoming festival season also helped the metal to recover some of its lost ground. Still, traders say that physical demand in Asia continues to remain subdued due to higher metal prices and economic slowdown in world’s two biggest gold consumers, China and India. Weaker dollar also provided some support to gold prices. On Monday, the euro gained vis-à-vis the U.S. dollar after results from regional elections in Spain boosted the single currency. The ruling centre right government, Partido Popular headed by Mariano Rajoy, won a regional election in Galicia. Analysts pointed out that by bringing PP back to power; voters seem to have approved the ongoing austerity measures. It is speculated that the election results will embolden Mr. Rajoy’s attempt to fix country’s fiscal imbalances even as expectations increased that Spain could soon ask for a bailout. Spot gold edged up 0.3 percent to settle at $1,725.10 an ounce, having earlier plunged as low as $1,713.39, its lowest level since Sept. 7 while U.S. gold futures for December delivery gained $2.30 an ounce to close at $1,726.30. According to Reuters, the trading volume was nearly 35 percent below its 30-day average. However, gains were capped as U.S. dollar Index ticked higher on Monday. The ICE dollar Index, a gauge on U.S. unit’s performance against a basket of six major currencies, climbed to 79.642 on Monday from 79.629 on Friday. In general, a weaker U.S. dollar tends to bolster the demand for dollar dominated commodities as they become cheaper to buy for those traders who deal in currencies other than the greenback. Metal analysts expect bullion market will be under pressure as investors are likely to adopt wait and watch policy ahead of Federal Reserve’s policy statement. Fed’s policy setting arm will start its meeting on Tuesday and the policy statement is scheduled to be released on Wednesday. According to Reuters, some analysts have warned that if gold prices fall below 50 day moving average then it could trigger more technical weakness. In a note to investors, Jeffery Wright, managing director at Global Hunter Securities said, “The gold market will be taking signals from the Federal Open Market Committee meeting, presidential debate tonight if any surprises come about and European developments regarding Spain through the end of the week.” James Steel, metal analyst at HSBC, wrote in his note, “With prices near the $1,720 support level, a sustained drop below this key level may elicit further short-term liquidations, in our view.” A data provided by Reuters showed that net interest, a measure on total outstanding long and short positions on gold futures fell by 8 percent at the U.S. Comex division of the New York Mercantile Exchange, during last week as metal consistently failed to cross the key resistance level of $1,800 an ounce. Moving onto some other precious metal markets, silver jumped 0.5 percent to end the day at $32.22 an ounce, while platinum settled up 0.4 percent to $1,600.99 an ounce and palladium slipped 8 cents to close at $618.22 an ounce.
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