Gold climbed bouncing back from a sell-off the previous day, as the dollar slid against the euro and higher crude prices boosted the metal's appeal as a potential hedge against inflation. The precious metal jumped almost $10 after the dollar/euro exchange rate turned sharply in favour of the euro. The long-term inflation expectations were boosting gold's appeal and further data reinforcing those views would help the metal to build on its gains. Elsewhere economic data remained mixed as U.S. manufacturing mustered its highest level of activity in nearly a year in June but unexpected weakness in private sector employment signalled how slow an economic recovery might be.
Crude oil dwindled after government data showed gasoline and distillate inventories rose more than expected last week, overshadowing a larger than forecast drawdown in crude stocks. Particularly disappointing was the decline in gasoline demand ahead of the July 4 Independence Day holiday, usually a heavy demand week for motor fuel. Crude stock draw reported by the U.S. Energy Information Administration was far less than what industry group American Petroleum Institute reported, cooling down the market surge just before the government data was released.
U.S. manufacturing surged in June but unexpected weakness in private sector employment signaled how slow an economic recovery might be, according to the reports. While some parts of the economy are showing signs that the 18-month-old recession, the most protracted in decades, may soon end, job losses are seen accumulating long after the economy starts expanding again. U.S. private employers slashed a bigger than expected 473,000 jobs in June, according to a report from ADP Employer the Institute for Supply Management said its index of national factory activity edged up to 44.8 from 42.8 in May and above economists' median forecast for 44.5. Pending sales of previously owned homes edged up 0.1% in May, for the fourth straight monthly gain. U.S. construction spending tumbled 0.9% in May, however, to the lowest rate in more than five years, showing an economic stimulus plan passed in February had given little relief to public construction.
Copper accelerated as manufacturing surveys in the United States and China and a weaker dollar helped boost sentiment, but gains are expected to be capped by a seasonal lull in demand. Aiding to the positive mood was data from the Institute for Supply management, which showed manufacturing in the United States, the world's largest economy, shrank in June, but at a slower pace than the month before. Manufacturing surveys from China, the world's largest consumer of copper, showing the sector extended a recovery in June were another plus. Also lifting sentiment in copper are falling stocks of the metal in LME warehouses, which at around 266,000 tonnes compare with levels around 500,000 tonnes in early April.
Courtesy: Religare Commodities 24-Hour Online Forex Trading. Start with FREE practice account
