Broker's Notes: Gold bounces back; US dollar trades firm

Gold
Gold bounced on Friday on bargain hunting by jewellers after losing 1.5 per cent in the previous session, but was heading for its biggest weekly fall since July as the dollar firmed ahead of a G20 finance ministers meeting. Gold was about 4 percent below a lifetime high around $1,387 an ounce hit last week, losing its appeal as an alternative investment as the dollar regained strength despite anticipation of further monetary easing by the U.S. central bank. Purchases by jewellers stirred up the physical market, keeping premiums steady in Singapore at 50 to 70 cents to spot London prices. Dealers expected purchases from jewellers in top consumer India to pick up because of a recent drop in gold prices ahead of important religious festivals in November. The world's largest gold-backed exchange-traded fund, SPDR Gold Trust said its holdings slipped to 1,298.266 tonnes by Oct. 21 from 1,299.177 tonnes on Oct 20. The holdings hit a record at 1,320.436 tonnes on June 29.

US dollar
The US dollar traded firm on Friday as G20 finance ministers began a meeting which players doubt will yield much progress on the vexed question of currency depreciations, with charts instead dictating play. Japan's finance minister Yoshihiko Noda said the group of 20 finance and central bank chiefs did not have a specific currency agenda for their two-day meeting, adding that a U.S. proposal to set current account targets was "unrealistic". Some saw the possibility of a statement playing down the notion of a currency conflict, which might offer the dollar some support near term, but others said any reaction would be brief and attention would flick back to the other major question of how big any quantitative easing by the Federal Reserve might be.

Euro
The euro was up 0.1 per cent at $1.3934 with initial support at about $1.3870, Thursday's low and a 50 per cent retracement of its rebound from this week's $1.3697 low, then at $1.3820-30 and $1.3775. Initial resistance is plotted at $1.3960 with bigger resistance at Thursday's high around $1.4050, where a break would open up for a re-test of $1.4161, the top of the recent rally and its highest level since January. he euro slipped 0.1 percent to 113.11 yen with selling appearing to come from hedge funds or institutional investors.

Oil
Oil rose on Friday as the dollar weakened, after jobs and business activity data signalled the U.S. economy would require additional stimulus. A G20 finance ministers meeting in South Korea looked unlikely to reach a conclusion on currencies as dollar volatility rattles commodities markets. Oil was still headed for a second straight week of losses, though marginal, responding to a rising dollar that was on track for its first week of gains in six weeks. A stronger dollar raises the cost of oil imports for buyers excluding top consumer the United States. Despite intra-day volatility, oil prices have so far this month remained in a relatively tight range slightly wider than $5, between Tuesday's low of $79.25 after China raised interest rates and a five-month peak of $84.43 on Oct. 7.

Indian rupee
The Indian rupee fell on Friday tracking Asian peers, a steady dollar and on concerns about foreign fund outflows once Coal India begins to refund excess subscriptions received towards its initial public offering. State-run Coal India's $3.5 billion IPO, the country's largest, was more than 15 times subscribed on Thursday, its final day for subscription, powered by an institutional order book worth about $27 billion from foreign funds. The Coal India IPO refunds would be made by late October or early November. We expect the rupee to touch 44.70-45.20 per dollar once technical resistance level of 44.55 is broken.

Source: Richcomm Global Services, DMCC, Dubai