Gold rises $1062 on weak dollar

Spot Gold prices traded higher on Monday and returned close to record highs as a weaker dollar supported prices on the upside. The yellow metal touched a high of $1,062/oz yesterday as the dollar slipped ahead of a US Interest rate decision.

The International Monetary Fund (IMF) said on Monday that it sold 200 tonnes of gold to the Reserve Bank of India for $6.8 billion, executing its long-planned bullion sale that had threatened to slow the rally in gold prices.

The IMF sale is part of an agreement struck earlier among IMF member countries to sell 403.3 tonnes of the body’s gold stocks to diversify the Fund’s sources of income and to increase low-cost lending to poor countries. The fact that the IMF has sold gold to Indian indicates that there would be fewer official sales by the IMF on the market. This could be a positive to the gold market.

In the currency market, The Euro gained against the dollar on Monday but still closed below the 1.50 mark. Demand for higher-yielding assets got a boost on the back of better US manufacturing data. For the day, support is seen at 1.4690/1.4605 whereas resistance is seen at 1.4850/1.4930.

The Indian Rupee closed on a higher note for a second day on Friday as exporters sold dollars expecting a further strengthening in the currency. However, on a week-on-week basis the Indian currency depreciated 0.9% as a fall in domestic equities raised concerns over the capital outflows from the country. For the day, support is seen at 46.70/46.60 whereas resistance is seen at 47.20/47.40.

The latest data releases from the US indicate that the economy is out of recession and the government might soon consider pulling back the stimulus measures.

This would also mean a rise in US interest rates could be around the corner. If not the immediate meeting, then interest rates could rise soon after that and that could give the US Dollar Index a push to the upside. The rally in gold prices could be limited till the fractured state of the dollar.

Once interest rates are pulled back then the dollar could revive as its appeal could rise. Hence, we expect gold prices to continue trading upside only till the dollar remains weak as it makes the yellow metal look attractive for holders of other currencies.

On intraday basis, Spot Gold prices have immediate support at $1044/$1029 whereas resistance is seen at $1068/$1077. Spot Silver prices shall find support at $16.20/$16.00 whereas resistance is seen at $16.70/$16.90.

MCX October Gold has support at 16055/15995 whereas resistance is seen at 16175/16235. MCX Dec Silver shall find support at 25960/25870 whereas resistance is seen at 26235/26415 levels.

Courtesy: Angel Commodities

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