Broker's notes: Gold climbs as dollar weakens

Gold

Gold rose nearly one percent on Monday, off its more than two week low hit last Friday, driven by a weaker dollar, as investors wait for the US Federal Reserve Chairman Ben Bernanke to speak later in the day.

A speech by Bernanke, scheduled at 1230 GMT, could shed light on the Fed's monetary easing move, which many have expected to take place as early as next month.

Much of the prospect of QE has been priced in, and it's the magnitude and timing that investors are looking at now.

Robust physical demand from India ahead of its important festival season, as well as from other countries, is likely to keep gold prices buoyed. 

The ongoing concerns on the recovery of the global economy and inflation due to lax monetary policies have made gold a popular investment, pushing the precious metal up 22 percent so far this year, outpacing copper's 15 percent gain.

US dollar

The US dollar fell to a 15-year low against the yen on Monday, drawing ever closer to its post-war record low of 79.75 yen set in 1995 as traders took a weekend G20 statement as a green light for continued dollar weakness.

The dollar dropped to as low as 80.65 yen its weakest level since 1995 and down about 0.9 percent on the day. The market is wary that Japanese authorities might intervene to defend the 80.00 yen level to prevent the dollar from reaching the record low, after they stepped in to sell yen on Sept.15 for the first time in more than six years.

Since then, however, the dollar has continued to fall across the board as the market has anticipated a second round of quantitative easing expected from the Federal Reserve later this year, possibly at its next meeting on November 2 to 3.

The Group of 20 finance ministers agreed on Saturday to shun competitive currency devaluations but stopped short of setting targets to reduce trade imbalances, and struck a surprise deal to give emerging nations a bigger voice in the International Monetary Fund.  

At the meeting in South Korea, G20 finance ministers also struck a surprise deal to give emerging nations a bigger voice in the International Monetary Fund, recognising the quickening shift in economic power away from Western industrial nations.

The outcome at the G20 pointed to the continuation of a status quo in currency markets, with the dollar staying under pressure due to market expectations for the US Federal Reserve to unveil a second round of quantitative easing as early as November.

Yen

Japan's exports trumped expectations in September, but the seventh consecutive slowdown in annual growth showed the economy was feeling the pinch from the strong yen and slackening growth in its overseas markets.

The 14.4 per cent increase from a year earlier well exceeded  economists', which some analysts took as a sign that exports were proving more resilient to the currency's strength and global headwinds than some had initially feared.

Oil

Oil rose past $82 on Monday as the dollar tumbled ahead of a speech by Federal Reserve Chairman Ben Bernanke, where he may outline details of an expected new round of US monetary stimulus.

Indian rupee

The Indian rupee pulled back on Monday from its biggest one-day loss in a month-and-half in the previous session, as broad dollar selling resumed globally while gains in local shares also aided sentiment.

Oil firms, the largest dollar buyers in the currency market, and other importers usually pump up purchases toward the end of each month when they are required to make payments.

Coal India's $3.5 billion IPO, the country's largest, was more than 15 times subscribed last week, giving the government power to price the issue at the top of its range and building momentum for other state offers.

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