US gold futures defied dollar movements and ended 0.34 percent higher at $1,105.40/oz yesterday. Gold rose on demand for safe haven after sovereign debt concerns increased when UK and US have been warned by Moody that blue-chip status of their credit ratings is at risk.

Gold prices traded higher in Asia and Europe except few jerks during afternoon session when concerns that many European central banks may sell some of their gold holdings to back European Monetary Fund pushed gold prices to as low as $1,101/oz.

Gains in the dollar index were imparted by the weaker euro and the Pound. Euro came under pressure after some EU finance ministers ruled out financial aid for Greece. GBP lost against the dollar after Moody warned of a possible downgrading of UK’s debt rating.

Concerns over UK election polls which are expected to see no parliamentary majority after the May general election put further pressure on the sterling.

Equities fell after three days. The MSCI world index for stocks closed 0.45 percent down.

Crude oil prices fell below $80 levels and closed 1.77 percent down at $79.80/barrel.

SPDR Gold Trust maintained its gold holdings at 1115.51 MT as on Mar 15.

Domestic gold futures also rose 0.5 percent to end at Rs. 16,538/10 gm. Indian rupee depreciated by 0.32 percent to 45.5888 and supported domestic gold prices.

Outlook

Gold may rise for the second day as gold’s safe haven demand is sought by investors amid doubts lingering over any financial assistance to Greece. Gold is trading $4 up at $1,109/oz in Asia. Today’s reports may also show that both housing starts and building permits in the US declined and thus may put some pressure on the dollar. US import index also fell in February and thus reduces the possibility of any interest rate hike. FOMC rate announcement, most likely to remain unchanged at 0.25 percent, is also scheduled in late hours. Consumer prices in the euro zone rose 0.3 percent in February following a decline in the month before. ZEW Survey for economic sentiments in the euro zone and Germany is expected to have fallen for March month. Markets may see heavy volatility on the wake of a number of data releases today. Data expectations suggest some downfall in the dollar which may lead bullion prices to advance.

Courtesy: Karvy Commtrade Ltd.

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