Broker's Notes: Gold edges down; euro struggles

Gold

Gold edged down in thin trade on Thursday after encouraging US jobless claims data calmed some worries about economic growth, but concerns over tensions on the Korean peninsula could offer some support. Bullion barely reacted to news that Vietnam's central bank has granted additional quotas for domestic companies to import gold between now and the year end, but dealers noted buying on dips from consumers in Asia. North Korea warned of additional military attacks if South Korea makes "reckless military provocations again". The United States says it believes North Korea's actions were an isolated act tied to leadership changes in Pyongyang, and many experts say the North carried out the shelling to burnish the image of the inexperienced and little-known younger Kim. The gold market in India, top consumer of the metal, is still in the midst of its busy season after the Dhanteras and Diwali festivals earlier this month as many weddings are to take place till December, spurring at least some demand for the metal that plays an important role in social functions.

Euro

The euro struggled near a two-month low as the euro zone debt crisis showed signs of spilling over from Ireland to other euro zone members even after Ireland unveiled an ambitious austerity plan. Portugal and increasingly Spain are seen as potentially in need of help while Dublin's belt-tightening plan has come under fire for sticking to economic growth assumptions, unveiled earlier this month, seen as too optimistic. Trade was thin, however, due to the U.S. Thanksgiving holiday on Thursday. Some market players said the fall in the euro as well as the Aussie reflected short-covering in the U.S. dollar before the holiday. The euro shed 0.2 percent on the day to trade at $1.3312. It pierced through major support around $1.3333 to hit a two-month low of $1.3284 on Wednesday. Next support is pegged at $1.3232, a 61.8 percent retracement of the August to November rally, a break of which could see the single currency target $1.3000.

Us Dollar

The US dollar index which tracks the greenback's performance against a basket of major currencies, flirted with a a two-month high just short of 80.000 overnight and was last at 79.83, almost flat on the day. The greenback was aided by U.S. data showing a fall in new claims for jobless benefits to two-year lows and another rise in consumer spending, raising hopes of a stronger U.S. recovery. Those figures helped spur a rally on Wall Street, though data on U.S. housing and durable goods orders was weak, painting a mixed picture on the economy.

Sterling

Sterling hit a near two-month high against a broadly struggling euro on Wednesday due to uncertainty about how the euro zone will deal with debt problems facing weaker periphery members. The euro fell as low as 84.28 pence, its weakest since late September, before trimming losses. Some traders cited demand for Euros from a UK bank as helping to lift it from session lows. Ratings agency S&P on Wednesday said Ireland's growth expectations were too optimistic, a day after it cut its sovereign rating.

Indian rupee

The Indian rupee treaded water on Thursday after hitting a two-month low in the previous session, with firmer local shares underpinning sentiment. However, political tensions globally and financial scandals in India could keep the rupee under pressure in the coming weeks. Foreign equity inflows, which were a key factor for the rupee's 1.8 percent rise this year, are likely to be swayed by year-end profit-taking and developments in the euro zone. The rupee should move in a 45.65-45.85 band and volume will be light due to the U.S. Thanksgiving holiday. On Wednesday, eight top officials in financial firms were arrested in India's third biggest corruption scandal in the past few months. The federal police said the officials received bribes valued at hundreds of millions of dollars.

Source: Richcomm Global Services, DMCC, Dubai