Brokers' notes: Gold rises as euro weakens

Gold

Gold rose more than half a percent on Monday with investors chasing the precious metal as the euro weakened against the dollar on concerns over euro zone debt and Ireland's bailout package. 

Tensions on the Korean peninsula following Seoul's plan to go ahead with live firing drills from a disputed island near the disputed northern border offered additional support. But many expect slow trading ahead as the year-end nears.

Bullion has risen as much as 30 per cent this year. The Conference Board's leading economic indicators jumped 1.1 per cent in November, the biggest rise since March and the fifth straight monthly gain.

Separately, the Economic Cycle Research Institute said its gauge of future growth rose to its highest level since May. Gold sold off after the news, dipping below the 50-day moving average for the second straight session.

However, later it moved back above the medium-term measure, keeping prices within their higher plateau in a wide 3-month range around peak levels.

Investor demand for gold-backed exchange-traded funds remained light, with holdings of the world's largest, New York's SPDR Gold Trust falling to a two-month low of 1,283.757 tonnes on Thursday.

Euro

The euro slid to a two-week low on Monday, looking vulnerable to more losses against the dollar after breaching chart support the previous day, while the greenback was helped by rising tensions in the Korean Peninsula.

The euro, which was pressured by a five-notch downgrade of Ireland's sovereign credit rating on Friday, was within reach of support at $1.3100-3090 a retracement level and its 200-day moving average.

On top of continued debt concerns in the euro zone, the dollar was supported by tensions on the Korean peninsula, where South Korea plans a live-firing drill and North Korea has threatened to strike if the drill goes ahead.

Many in the market expect the euro to remain vulnerable into the New Year as investors await more aggressive solutions from European leaders to address debt concerns in the region, although activity is dwindling ahead of holidays at the end of the week in many financial centres.

Indian rupee

The Indian rupee fell to its lowest level in three weeks on Monday, weighed down by a weak euro, Asian peers and modestly lower domestic stocks. Indian shares were down tracking weak

Asian markets but Hero Honda share prices soared after India's Hero Group said it will buy Honda's stake in the motorcycle JV and traders said concerns over a likely hike in royalty rates had been allayed. 

One-month offshore non-deliverable forward contracts were quoted at 45.75, weaker compared to the onshore spot rate. The rupee is tracking euro and Korean tensions.

Australian dollar

The Australian dollar hit a record high on the euro on Monday and a 25-year peak on the sterling after Ireland's debt rating was slashed and as risk appetite proved resilient to tensions in the Korean peninsula and to falls across Asian stock markets.

The Aussie showed little reaction to South Korea’s decision to launch of live firing drills in a disputed area, despite threats of war from North Korea. In Australia, this week's focus will be on the minutes of the December meeting of the Reserve Bank of Australia due out on Tuesday.

Analysts will look for clues about the timing of the next rate hike following the central bank's decision to leave the cash rate unchanged at 4.75 per cent. 

Oil

Oil prices rose on Monday as forecasts for freezing temperatures in Europe and the US Northeast this week looked to boost heating fuel demand. Crude for January delivery climbed 14 cents to $88.16 a barrel adding to gains from the previous session.

The US Northeast, the world's top heating oil market, was expected to be colder than usual from December 24 to 28, according to weather data released on Friday. In Europe, Arctic conditions were expected to continue in the north this week, potentially prolonging travelling disruptions during one of the busiest times of the year. 

Oil prices also found support from renewed tensions in the Korean Peninsula and positive US economic data. 

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