Broker's Notes: Gold closes in on $1400

Gold

Gold hit another record above $1,398 an ounce on Monday before a rebound in the dollar caused prices to retrace, though short-term sentiment remains upbeat. The world's largest gold-backed exchange-traded fund, SPDR Gold Trust said its holdings slipped to 1,291.766 tonnes by November 5 from 1,292.189 on November 2. The holdings hit a record at 1,320.436 tonnes on June 29. In the physical sector, higher gold prices attracted selling but premiums for gold bars were steady in Singapore as bargain hunters resurfaced at lower levels.

US dollar

The US dollar rose sharply on Monday as unwinding of dollar short positions that began with solid US jobs data snowballed, pushing down the euro to its lowest level since the Federal Reserve embarked on fresh easing last week. Worries about debt problems in Ireland and other euro zone countries - while hardly new to markets - were also cited as hurting the common currency as markets look for trading factors now that the Fed's quantitative easing has become reality. The dollar soared on Friday after data showed US employers added 151,000 jobs in October, blowing past expectations of a 60,000 rise and marking the fastest pace of hiring since April.

Euro

The euro fell 0.6 percent to $1.3940, triggering a succession of stop loss sell orders as it dipped as low as $1.3919. It broke below key support around $1.3990, its lowest since the Fed announced plans to purchase $600 billion of Treasuries last Wednesday. The euro now eyes support around $1.3920, a 61.8 percent retracement of its Oct. 20 to Nov. 4 rally to a 10-month high of $1.4283 from $1.3695. Another support level is seen around $1.3865, a low hit on Nov. 1. On Friday, the cost of protecting Irish government bonds from default and the 10-year Irish bond yield spread over benchmark German debt hit record highs, weighing on the single currency.

Yen

The dollar was little moved against the yen at 81.20 yen, though it remained about a full yen above its 15-year low around 80.21 yen plumbed last week. Dollar/yen is flirting with the 21-day moving average, now around 81.25 yen. A break above the average could fuel more short-covering in the dollar, though it is likely to be capped around 82 yen, where a lot of dollar selling from Japanese exporters is expected.

Oil

US crude oil rose slightly on Monday, trading near $87 a barrel on continued support from last week's US Federal Reserve's economic stimulus package and stronger-than-expected jobs data. Oil prices are likely to trade in a tight range near $87 a barrel on profit-taking and as the market seek additional cues on demand. While a new round of economic stimulus in the US is boosting the appeal of commodities, a sluggish but sustained economic recovery in other industrialized economies and rampant growth in emerging Asia are raising demand for energy and raw materials. Last week, OPEC's secretary general indicated that prices of $90 a barrel would not hold back the world economy, a higher level than previously identified as posing no risk to growth.

Indian rupee

The Indian rupee weakened in early trade on Monday, tracking losses in local shares and also weighed down by sharp gains in the dollar against major currencies, especially the euro. The Indian forex market was closed on Friday for the Diwali holiday. The main share index was down 0.5 percent, tracking weak Asian share markets with some amount of profit-taking also kicking in. Foreign funds have so far in 2010 purchased shares worth a record $26.6 billion, in addition to last year's $17.5 billion.

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