Wednesday, 15 May 2013

Hot Commodities: Gold Tumbles Towards $1400, Strong Dollar Hurts

Gold slumped towards $1400 per ounce yet again in global markets, cutting back on the recent gains and witnessing heavy selling pressure as gains in the US dollar hurt the sentiments. MCX Gold futures also witnessed a similar movement, extending its recent break under Rs 27000 per 10 grams level. The COMEX Gold futures quote at $1427.40, down $6.80 per ounce on the day. The counter had hit a high above $1440 per ounce earlier.

The euro slipped under 1.2900 against the US dollar today, extending the recent downward spell after quarterly economic reports from France and Germany missed expectations. With France now in recession and Germany posting weak growth in the first quarter, the dollar continued to benefit from relatively attractive growth prospects in the U.S.

French first-quarter GDP contracted by 0.2% compared with the fourth quarter of 2012, the third contraction in the last four quarters, according to the preliminary report from France's Insee agency. The German GDP edged up by 0.1% in the first quarter of 2013- managing to record nominal growth after stumbling in the previous quarter. In the last quarter of 2012, the German economy had suffered a major setback of -0.7%.

The US Federal Reserve should slow and then halt bond purchases when it's time to exit from the central bank's quantitative easing efforts, Philadelphia Fed President Charles Plosser stated yesterday. The Fed is buying $85 billion per month of Treasury and mortgage-backed securities- ensuring that the US dollar edges higher.

This has boosted the US dollar across the board and the persistently weak undertone in Japanese Yen has assisted the US dollar index to jump to its strongest level since July last year. Commodities are falling as a reason and Gold is getting hammered the most given the fragile sentiments after nerve wrecking collapse towards $1300 per ounce levels last month. MCX Gold futures for June tracked the global cues and tested lows near Rs 26400 per 10 grams. The counter has lost nearly Rs 300 today with a 4.75% increase in open interest indicating emergence of fresh shorts.

Source by Commodity Insights

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