Broker's Notes: Gold declines as dollar rebounds; oil falls too

Gold
Gold fell nearly one percent on Monday, weighed down by a rebound in the dollar, after Federal Reserve Chairman Bernanke on Friday gave few details of the much-anticipated easing move being weighed by the central bank. Bernanke on Friday gave his most explicit signal yet that the U.S. central bank was set to ease monetary policy further, but gave no details. Investors are eyeing U.S. industrial production data due later on Monday for clues to the timing and extent of the Federal Reserve's debt purchase programme.

Dollar versus other currencies
The dollar rose about half a percent against a basket of currencies on Monday, after rising off a 10-month low late last week, and technical indicators pointed to the possibility of a further short-covering rebound. Market players saying the short-covering bounce may have more room to run given the recent build-up of bets against the dollar. The Australian dollar backing off from Friday's peak above parity that was the highest since it was floated in 1983.

The dollar index rose 0.5 percent to 77.402 having hit a 10-month trough of 76.144 on Friday. The euro shed 0.7 percent to $1.3881 pulling away from its highest in more than eight months of $1.4161 hit on Friday. The latest data from the U.S. Commodity Futures Trading Commission showed that speculators trimmed bets against the dollar in the latest week but still had hefty bets against the U.S. currency. The value of the dollar's net short position slipped to $29 billion in the week ended Oct. 12, down from a net short of $30.5 billion in the previous week, the biggest bet against the dollar since at least June 2008.

Oil
Oil fell towards one-week lows on Monday as a rebound in the dollar prompted investors to halt their charge into commodities, while waiting for details about possible U.S. economic stimulus measures. U.S. inflation unexpectedly slowed in September, despite a pickup in retail sales, the government said on Friday. A survey showed the country's consumer sentiment unexpectedly dipped in early October to its weakest level since July. Key oil producer Saudi Arabia is holding a conference in Riyadh on Monday to mark the 50th anniversary of the Organization of the Petroleum Exporting Countries (OPEC), which the kingdom's oil minister Ali al-Naimi is scheduled to attend.

Indian rupee
The Indian rupee weakened on Monday, pulling back from over 25-month high scaled in the previous session, weighed by dollar demand from oil importers, strong dollar overseas and losses in local shares. Capital inflows were also not too strong so far in the day, which added to the rupee's downside. Indian shares fell as much as 1 percent early on Monday, taking cues from weak Asian markets and as the world's largest coal miner Coal India's $3.5 billion IPO, the country's largest, opened. The Rs 15,000 crore initial share sale offer of the state-owned Coal India Ltd (CIL) got subscribed 34 per cent within hours of opening of the issue today. As per the data available till 2:00 pm with the National Stock Exchange (NSE), the nation's largest ever public issue received total bids for 21,33,31,975 shares compared to 63.16 crore equities on the offer.

Sterling
Sterling fell sharply against the dollar on Monday, coming off last week's eight-and-a-half month high in line with a broad rebound in the U.S. currency on doubts about how aggressive Federal Reserve monetary easing will be. Against the euro, the pound was steady, but it remained vulnerable, with the UK government set to announce on Wednesday how it will achieve deep cuts in public spending. These could exacerbate worries Bank of England policymakers could opt for a new bout of quantitative easing to stimulate a flagging economy. Minutes due on Wednesday are expected to show at least one policymaker, Adam Posen, voting for more QE.

Source: Richcomm Global Services, DMCC, Dubai