Broker's Notes: Gold edges higher in thin trade

Gold and silver

Gold prices edged higher in thin pre-holiday trade on Friday, supported by bargain-hunters in Asia and a weaker US dollar, with uncertainties in Europe's fiscal health expected to continue buying interest in precious metals. The US economy showed new signs the recovery was gaining traction, with data on Thursday showing that new claims for jobless aid fell last week and factory activity in the Mid-Atlantic region grew at its quickest pace in more than 5-1/2 years this month. The non-commercial long positions on US Silver eased to 32,969 by Dec 7 from 34,034 a week earlier, data published by the Commodity Futures Trading Commission showed. Silver rose 1.4 per cent to $29.26, after declining to a one-week low of $28.32. The metal, which has gained 74 per cent so far this year, is on course for a weekly rise of 2.4 per cent.

Euro

The euro traded firm on Friday, showing some resilience after bouncing off trading-range support, while the dollar paused after oversold US Treasuries gained a bit of ground, taking the benchmark yield off this week's highs. The dollar's failure to push through the top of this month's trading ranges against the euro and yen has left the market in consolidation mode as operations wind down for the year-end, although many in the market doubt the euro's troubles are over. The euro has tested support in the $1.3165-80 band several times in the past week but failed to break cleanly.

Eurozone issues

EU leaders agreed at a summit on Thursday to make minor changes to the group's governing treaty to establish a permanent mechanism from mid-2013 to resolve sovereign debt problems, diplomats said. A draft statement, to be issued at the end of the two-day summit, showed euro zone leaders will declare their readiness to ensure adequate funds are available for the euro zone rescue fund, the European Financial Stability Facility (EFSF). However euro is not out of the woods as European policymakers still appear divided over more concrete measures, such as making more money available to the European Financial Stability Facility or issuing joint European sovereign bonds or "E-bonds". Data later on Friday includes Germany's IFO business climate index for December, which is forecast at 109.1 from 109.3 previously. The current conditions index is expected to edge up to 112.5 from 112.3.

Sterling

Sterling edged higher against the dollar and the euro on robust retail sales data and as British inflation expectations continued to rise, though gains were limited by a mixed overall outlook for the economy. The pound rose after UK retail sales figures for October were revised higher, while year-on-year sales for November were above forecast. However, monthly retail sales growth in November was slightly lower than expected, and analysts said any significant gains in sterling on the data would be limited. The BoE survey showed British inflation expectations for the year ahead at 3.9 percent, nearly double the central bank's 2 percent target.

Source: Richcomm Global Services, DMCC, Dubai