Broker’s Notes: Euro drops as gold heads for $1,300 per ounce

Euro

The euro fell on Thursday as concerns mounted about European economic recovery, coming off a five-month high hit against the dollar the previous day after the U.S. central bank had signalled more monetary easing. A survey of purchasing managers showed growth in the euro zone slowed in September while euro zone peripheral bond yield spreads widened against German counterparts. The euro is expected to remain above its 200-day moving average near $1.3208 after breaking above it the previous day, climbing to $1.3441 yesterday, its highest since April. On the upside, the next target was seen at $1.3510, the 50 percent retracement of its fall from $1.5145 last November to its June low of $1.1876.

Gold

Gold held steady on Thursday after touching record highs for the fifth consecutive session, and silver hit a 2-½ year peak, as economic uncertainties boosted investor appeal for these safe-haven assets. Most market participants expect gold to break through the psychologically important $1,300 level soon as market sentiment rides high on worries about the health of the economy, even though the market has been overbought. There isn’t an iota of doubt about the role of the investment demand in pushing the metal through the skies. Investment demand has siphoned about 1,304.16 tonnes of gold and this can further burgeon. Gold has risen by over 17 percent this year, as investors have sought a relatively safe asset in which to park their cash as major currencies, stocks and bonds have become increasingly volatile. Silver too has surged at a faster pace and investors swarmed the metal. The world's largest silver-backed exchange-traded (iShares Silver Trust fund) recently reported that its holdings rose to 9,509.55 tonnes by Sept 21, the biggest gain in nearly 10 months. With dollar getting definitely weaker with the pass of every session, gold has little work to do other than to head higher to compensate for dollar’s slide. Most of the market focus has been the extreme dollar weakness and possible impact on the currency as the market encounters weaker economic data.

Dollar

The dollar steadied on Thursday after sharp selling the previous day when the US Federal Reserve hinted at more easing, pushing Treasury yields down and keeping the greenback pinned near a five-month low on the euro. Market players sold dollars as they positioned for more US quantitative easing later this year. The dollar index steadied above 80.01 after hitting a six-month trough of 79.560 on Wednesday.

Oil

Oil was steady below $75 on Thursday after government data showed an unexpected increase in US crude and gasoline stockpiles, ahead of key jobs and housing reports later in the day. The inventory increase last week, despite the eight day-long shutdown of the biggest pipeline shipping Canadian crude to the US, reaffirmed views that prices would mostly remain rangebound for the rest of the year between $70 and $80, the preferred level for Opec producers. The Organization of the Petroleum Exporting Countries should keep its oil output targets unchanged at a meeting next month and comply more closely with its production agreements, the top oil official for Opec member Libya said on Wednesday. The Energy Information Administration said that the US total petroleum stockpiles climbed to a record 1.144 billion barrels last week, the highest level since it began collecting weekly data in 1990. The nation's crude inventories rose 970,000 barrels in the week to Sept. 17 as imports increased, according to the EIA.

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