Gold gains as an inflation hedge and on default woes

Gold inclined today recovering the losses recorded last week, where concerns are dominating the market regarding inflation threats with three central banks rate decision this week, where the European central bank is to raise the benchmark interest rates this meeting in order to ensure price stability.

Spot gold opened the Asian session today at $1486.50 per ounce, recording the high of $1494.80 and the low of $1485.70 and is currently trading around $1494.10 per ounce.

In Europe, the European central bank is expected to raise interest rates by 25 basis points in order to contain rising inflation, which rallied to 2.7%, higher than the bank's ceiling of 2%. The bank's primary mandate is to maintain price stability in the zone, which increased the appeal for gold as an inflation hedge.

On the other hand, concerns eased regarding a Greek default in early hours, where during the weekend, the European finance ministers agreed to hand the Greek government the 8.7 billion euros tranche of the last year's bailout package to be delivered by mid-July, after Greece met the requirement and passed the austerity measures.

Nevertheless, fears rose once again after S&P warned that the debt rollover discussed to cover the Greek government's finances for 2011-14 will be counted as an elective default, raising the pressures on the market and supporting gold.

In England, concerns are dominating the market, where the Bank of England is facing a difficult decision whether to raise interest rates in order to contain high levels of inflation or to keep rates unchanged to stimulate growth, where inflation rose 4.5% in May compared to the bank's targeted inflation of 2.0%, which may support the upside trend for gold, especially as the bank holds rates steady.

The dollar continued the downside trend, extending the losses recorded in the past week, and reaching the lowest in three weeks this morning, which supported the dollar-denominated commodities to trade higher, easing the pressures forced on precious metals and crude oil.

Moreover, the United States of America is out of the market today, celebrating the Independence Day which will increase fluctuations amid thin trading.

The dollar index declined today from the opening of 74.28, recording the high of 74.32 and the low of 74.10 and is currently trading around 74.23.

Silver also inclined today to trade above the opening of $33.79 per ounce, recording the high of $34.15 and the low of $33.75 and is trading in the moment around $34.02 per ounce.

Among other precious metals, platinum inclined to currently trade around $1716.00 per ounce after the opening of $1710.00; it recorded the high of $1718.00 and the low of $1709.00 per ounce during the session.