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Gold Rebounds As Traders Buy On The Cheap

By:
Barry Norman
Updated: Aug 21, 2015, 13:00 UTC

Gold on COMEX rose in early trade on bargain buying, but a firm dollar against the euro weighed on prices. Gold prices received support, as recent

Gold Rebounds As Traders Buy On The Cheap
Gold Rebounds As Traders Buy On The Cheap
Gold Rebounds As Traders Buy On The Cheap

Gold on COMEX rose in early trade on bargain buying, but a firm dollar against the euro weighed on prices. Gold prices received support, as recent correction in prices has prompted Asian investors to increase physical purchases of the metal. Bullion is trading at 1582.70 adding close to $10.00 Monday morning as traders took advantage of weak prices to grab up the commodity.

Markets remain in a positive sentiment, but jitters over the Italian elections and the US “sequestered” budget cuts with the deadline looming closer as the month of February draws to a close.  Gold futures closed at their lowest level Friday since July and notched its second consecutive weekly loss, as a better US economic outlook and indications that the Federal Reserve may end its stimulus program prompted investors to buy riskier assets such as equities.  US Gold futures closed the week at $1580.4 an ounce, down by $29.90 or 1.86% for the week. Gold prices were also hurt after Fed minutes indicated that they would slow down or stop with their asset buying program well before the job market improves.

Strong equity markets in the beginning of the weak and positive German economic and business climate also dented gold’s safe haven appeal. Selling pressure has aggravated in the base metals complex, as concerns regarding metals demand in China is taking a toll on the sentiment. The complex is expected to trade lower today, as Chinese manufacturing activity expanded at a slower pace in February. HSBC preliminary PMI for February came in at 50.4, much lower than the prior reading of 52.3.

Gold holdings  of SPDR gold trust, the largest ETF backed by the precious metal, stood at 1,280.67 tons, as on Feb 22. While silver holdings of ishares silver trust, the largest ETF backed by the metal, stood at 10,602.76 tons, as on Feb 22.

The dollar index edged up to 81.463, from 81.377 in late North American trading Thursday. This morning the US dollar is continuing to gain and weigh heavily on some of its crosses. The euro is trading flat to Friday’s close to start out the Asian week.

The ECB said banks will repay 61.1bn euros of the second of two crisis ECB 3-year loans they took a year ago, far below the 130bn euros in repayments expected by the market.

The euro zone will not return to growth until 2014, the European Commission said on Friday, reversing its prediction for an end to recession this year and blamed on lack of bank lending and record jobless for delay in the recovery.

Gold prices are expected to go down further as a stronger dollar internationally and fears of withdrawal of Fed’s stimulus package are likely to push prices down. Rhetoric from US lawmakers could cause market volatility as Republicans and Democrats do not seem to be able to come to terms as the postponed Fiscal Cliff edges closer.

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