Brokers' Notes: Gold moves higher; euro gets a fillip too

Gold
Gold ticked higher on Monday as the euro gained after Ireland's rescue deal, helping the metal resist pressure from China's move to tighten its economy. China's steps to rein in inflation could dim gold's appeal in the world's second-largest consumer after India, but traders said a drop in bullion prices from all-time high levels were attracting purchases from other consumers in Asia. Gold is technically neutral as it hovers within a range of $1,340-$1,365 per ounce, and a further development of the chart is necessary to confirm its next directional move.

Euro, Asian stocks and commodities
The euro, Asian stocks and commodities got a fillip on Monday after global financial authorities agreed to bail out debt-swamped Ireland and protect Europe's wider financial stability. The size of Ireland's aid by the European Union and the International monetary Fund has yet to be negotiated, but is likely to be smaller than Greece's 110 billion euros bailout last May. One source said it could total 80 to 90 billion euros. A strong euro helped offset worries about China's move to tighten the economy. The People's Bank of China announced on Friday that it would increase required reserves by 50 basis points, its fifth such announcement this year, in a fresh attempt to keep a lid on inflation

Australian dollar
The Australian dollar tracked the euro higher, rising 0.7 percent to $0.9940 from $0.9862 on Friday, extending gains after having triggered stop-loss orders above $0.99. The Aussie shrugged off further tightening measures in China, Australia's largest export market as most regional shares rose. The AUD is still some 3 percent below a 28-year high around $1.0182 set earlier in the month.

Sterling
Sterling fell against the euro on Friday and struggled to gain in the early deals of Monday as anticipation an aid plan would be agreed for Ireland buoyed the single currency. The pound also fell against the dollar after China raised banks' reserve requirements, denting stocks and riskier currencies as concerns grew that tighter policy would dampen Chinese growth. The pound saw some support from Bank of England policymaker Paul Tucker who said central banks must not dilute their commitment to price stability, although this was short-lived with the market's focus elsewhere.

Indian rupee
The Indian rupee rose on Monday supported by higher local stocks and firmer Asian currencies, but the gains should be limited as foreign equity investors take profits with the year-end approaching. Demand for dollars is expected to pick up ahead of the end of the month when importers make payments. One-month offshore non-deliverable forward contracts were quoted at 45.55, weaker than the onshore spot rate, suggesting a bearish near-term outlook. The main stock index was up 0.4 percent after rising as much as 1 percent in early trade taking cues from firmer Asian markets. Prime Minister Manmohan Singh, weakened by a corruption scandal involving his sacked telecoms minister, told the Supreme Court on Saturday he had done nothing wrong and had followed correct procedures.

Oil
Crude futures rose above $82 a barrel on Monday, helped by a weaker dollar against the euro after the EU and IMF agreed to help bail out Ireland with loans to tackle the country's banking and budget crisis. Oil still remains well below a 25-month high of $88.63 hit on Nov. 11, but recovered after marking a four-week low of $80.06 on Wednesday amid concerns about the euro zone's fiscal health. Late on Friday, the U.S. government reported that money managers cut net long crude oil positions on the NYMEX in the week to Nov. 16, from record high levels the previous period. Money managers slightly reduced their net long positions in heating oil while raising them for gasoline, according to the report from the U.S. Commodity Futures Trading Commission.

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