Gold rose towards record highs; oil continues to trade weak

Gold

Gold prices rose towards record highs in Europe on Wednesday as risk aversion continued to weigh on assets seen as higher risk, such as stocks, while increasing flows into perceived havens like bullion. Charts signal that the break above 1254 is an indication that an immediate sell off isn’t envisaged unless and until gold continues to hover above the 1224 levels. The next level of resistance is at 1264-1268 zone.

Sterling

Sterling rebounded from six-week lows against the dollar on Wednesday after data eased concerns about a slowing housing market and on some stop-loss buying on its way up. Data from mortgage lender Halifax on Wednesday showed British house prices rose for the second month running in August, confounding expectations for a fall. House prices rose 0.2 percent in August after a 0.7 percent rise in July. Other data showed British manufacturing output rose 0.3 percent in July, the same pace as the previous two months, lifting the annual rate to 4.9 percent -- the highest since December 1994. GBP has tough resistance near its early September highs at $1.5490 and $1.5492, along with the 20-day moving average at $1.5502. There are also seems to be option barriers around $1.55.

Indian rupee

The Indian rupee strengthened on Wednesday boosted by dollar sales by exporters and a large telecom firm, while losses in the U.S. unit against major currencies also helped sentiment. Indian shares hit a fresh 31-month high before giving up some gains to end Wednesday 0.1 percent stronger, supported by continued foreign fund interest in the country's long-term growth story. So far in 2010, foreign funds have invested a net $13.4 billion in Indian equities, adding to last year's record $17.5 billion purchases. Capital inflows are likely to pick-up further in the fourth quarter of 2010 due to the seasonal revival in risk appetite and increasing possibility of a further stimulus from the U.S. and China.

Yen

The yen continued to trade firm around the 15-year highs against the dollar as a flare-up in worries over euro zone banks and sovereign debt led investors into safe havens. Persistent buying by investors seeking a temporary refuge in the yen helped push the US dollar through a major option trigger below 83.50 yen, testing the Japanese authorities' pain threshold for strength in their currency. Bank of Japan Governor Masaaki Shirakawa reiterated his reluctance to return to quantitative easing although he indicated the central bank was weighing its options on how to deal with the economic impact of the yen's strength.

Oil

Oil continued to trade weak below $74 a barrel on Wednesday, declining for a third straight session, but gaining European equity markets helped pare losses. European shares rebounded from earlier losses, leaving the pan-European FTSEurofirst up 0.75 percent. Share prices have been highly correlated with oil for most of 2010 because both are seen as indicators of economic health. Oil gained support on Wednesday from a weaker U.S. dollar which makes oil cheaper for other currency holders. The market is also awaiting the release of weekly U.S. industry and government statistics on inventories, delayed by a day following Monday's Labor Day holiday in the United States.

Source: Richcomm Global, Dubai