Gold gains for the third day on the uncertainty over the global economic outlook
Gold gained for a third day as China increased interest rates which spread concerns in the markets that the global economy might be slowing in addition to the European debt crisis which is still the main issue in the markets. The downgrade of Portugal's credit rating to junk by Moody's sparked demand on the precious metal as a safe haven amid caution ahead of the ECB decision later today.
Gold opened today at $1528.75 an ounce, recording the intraday high at $1534.32 an ounce, and the low of $1525.17 an ounce and is currently trading around $1529.50 an ounce.
Nevertheless, the dollar index, which tracks the dollar movements versus a basket of major currencies, moved higher today while gold is still holding on its high levels as the investors' tendency towards the metal as safe haven is offsetting the effect of a strong dollar.The USDIX opened at 75.02, recording the intraday high at 75.17 and the low of 74.90 and is currently trading around 75.05.
Inflation remains a top priority in China, and inflation rose by 5.5% in May the most since July 8 pressuring China's central bank to raise interest rate by 25 basis points for the third time this year, gold was bolstered by the decision on inflation hedge and also amid lingering fears over the banking sector's stability in China.
This further increased the demand on gold especially after Moody's said that the amount of problem loans for local governments in China are more than expectations keeping the pressures on banks and fueling fears over the government's need to bailout the banking sector.
Gold inclined after Moody's Investors Services Inc. yesterday cut Portugal's long-term debt rating two steps into junk, with a negative outlook, citing growing risk that Portugal will require a second round of official financing before it can return to the capital markets.
Debt woes come ahead of the ECB and the BoE's decisions on interest rates, and expectations are indicating that the ECB will raise interest rates by 25 base points in order to contain inflation, while the BOE is expected to keep the interest rate and the APF steady.
The main focus today is Trichet's conference, as it may cause more pressure and volatility in markets, and also we shouldn't forget the US jobs figures today ahead of the final NFP tomorrow, which will have its effect on the dollar starting today, and the dollar's movement will be reflected in the precious metals markets.
Among other metals, silver is still raising recording the high of $36.25 from the opening of $35.88 and recording the lowest at $35.79 and the metal is currently trading around $35.97.