Broker's Notes: Asian buying boosts gold

Gold

Gold rebounded on Monday after an early drop spurred buying from jewellers in Asia, but further gains could be limited by a rally in the US dollar amid persistent euro zone debt concerns. Investors also closely watched an escalating tension in the Korean peninsula, although dealers said there were no signs of buying related to the crisis sparked by North Korea's artillery attack on a southern South Korean island. 

Euro 

The euro fell to its lowest in two months against the dollar on Monday as the market looked past a rescue package for Ireland to other euro zone economies and a euro zone crisis resolution mechanism. EU finance ministers endorsed an 85 billion-euro ($115 billion) loan package to help Dublin cover bad bank debts and bridge a huge budget deficit, and approved outlines of a permanent crisis-resolution system which could make private bond holders share the burden of restructuring sovereign debt bought after 2013.    A key point for investors is whether the EU has done enough to stem fears from spilling over to other euro zone members such as Portugal, a problem not resolved after Greece was bailed out earlier this year. Ireland said the emergency loans would run for an average of 7.5 years, and EU Monetary Affairs Commissioner Olli Rehn said the final interest rate would likely be about 6 per cent, slightly lower than what some had feared.

Dollar

The dollar was up at its highest levels in two months against a basket of major currencies, at 80.390 after climbing as high as 80.652. The US currency briefly ticked to a two-month high of 84.20 yen holding firm after a gain on Friday, but quickly retreated to 84.11 yen.  It has breached its 100-day moving average at 84.09 yen but needs a clean break there to push on to the next resistance level around 84.40 yen, the highs of late September, and psychological resistance at 85.00.

Sterling

Sterling hit a two-month low against the dollar on Friday on concern about the UK's exposure to euro zone debt as fears grew that Europe's debt crisis could spread beyond Greece and Ireland. Sterling traded below its 100-day moving average against the dollar - which came in just above $1.5700 - for the first time since July, and a weekly close below that level could be seen as a bearish signal. It fell nearly 1 per cent against the dollar to $1.5612, its weakest since late September, before a small recovery to $1.5626. It extended falls after breaking below $1.5650, triggering stop-loss orders, traders said. More signs emerged of a shaky UK housing market on Friday, with the UK's Land Registry reporting house prices in England and Wales fell 0.8 per cent in October, the biggest monthly fall since February 2009.

Indian rupee

The Indian rupee rose on Monday, from a 10-week low touched in the previous session, supported by local share gains and dollar inflows towards the Manganese Ore India Ltd (MOIL) initial public offering. The bias is towards a strong rupee for the day looking at stocks and some positives arising out of the MOIL public issue. The initial public offering of India's largest producer of manganese ore opened last Friday and will close on Wednesday.

The company has fixed the indicative price band at 340 to 375 rupees a share for its IPO to raise up to $276 million.  India's main share index was up 0.63 per cent, with stocks of firms under probe for a bribes-for-loans scam remaining volatile.  India's federal investigator is probing 21 sizeable companies for links to a bribes-for-loans scandal that has hit lending and infrastructure shares and rocked the country's image as an investment destination. The Indian market regulator on Friday released the long-awaited auction details of an enhanced foreign institutional investment (FII) debt limit and set the sale date on December 2.

Source: Richcomm Global Services DMCC, Dubai
www.richcommglobal.com