Broker's Notes: Gold and other precious metals surge

Gold

Gold surged to a record high for the fourth day running on Tuesday, fuelled by renewed concern over high sovereign debt in euro zone countries such as Ireland and Greece and inflationary pressures. Silver touched $28.46 an ounce, the highest since March 1980, palladium saw $728.22 an ounce, its highest since April 2001. Platinum hit $1,790 an ounce its highest since July 2008. Worries about price pressures were reinforced last week by the U.S. Federal Reserve, which announced further monetary policy easing to help boost economic growth in the world's largest economy, the United States.   Investor interest can be seen in the holdings in the world's largest gold-backed exchange traded fund, SPDR Gold Trust which gained 2.43 tonnes to 1,294.196 tonnes, their highest so far this month.

US dollar ahead of G20 summit

On the radar is this week's G20 summit. Officials from Germany, Brazil, China and South Africa are among those expressing concern that the Fed's policy could weaken the dollar and drive up commodity prices. If the G20 fails to defuse global tensions, it may heighten investor concerns that policymakers are drifting further apart, leaving the world economy vulnerable.

Euro

The euro extended losses on Tuesday, under pressure over renewed concerns about peripheral euro zone debt as some players closed long euro positions against the dollar ahead of year-end book-closing. The euro fell to its lowest in over a week against the dollar, at $1.3823, and was down 0.5 percent for the day to trade at $1.3850.  Traders said there was potential for a slide to more important support at its Oct. 20 low of $1.3697, having fallen below support at $1.3835, the 76.4 percent retracement of its move up the Oct. 20 low to $1.4283 on Nov. 4. The cost of protecting government debt against default in Ireland, Portugal and Spain have risen substantially in the past week, highlighting the difficulties Europe faces with its sovereign debt and banking problems. These struggles could prompt the ECB, whose President, Jean-Claude Trichet said last week that money market conditions were normalising, to postpone any withdrawal of emergency measures put in place earlier this year. 

Indian rupee

The Indian rupee edged higher in late trade on Tuesday in line with the euro, which erased earlier losses, while gains in domestic shares and dollar inflows towards Power Grid Corp's share sale also helped. Rupee closed at 44.31/32 per dollar, 0.15 percent above the 44.38/39 close on Monday. The unit traded in the range of 44.31 to 44.4350 during the session. China signalled its intention on Tuesday to crack down on excess cash sloshing around its financial system, by unexpectedly raising the yield on bills at a central bank auction and vowing to stem hot money inflow. Power Grid Corp of India the world's third-largest power transmission company, on Tuesday launched a share sale to raise up to $1.7 billion before it closes on Friday. The sale was fully covered on its first day, exchange data showed.

Oil

Oil resumed gains to hit a fresh two year high above $87 on Tuesday, erasing earlier losses, as commodities rallied across the board. US crude oil futures hit $87.67 a barrel, the highest since October 2008.ICE Brent was trading 30 cents higher at $88.76. Oil reversed course following the release of the IEA's long-term energy outlook, in which the Paris-based agency said oil prices might exceed $100 a barrel in 2015 and $200 in 2035. Gains might be limited by a stronger dollar against the euro due to renewed concern about debt in Europe and an expected rise in US oil inventories.

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