Uncertainty increases in the market, gold to gain more today

As we get closer to the European Central Bank rate decision and the European summit, fears mix with hopes, while uncertainty increases in the market, as European officials are still coming up with more proposals to provide markets with strong and comprehensive solution to tackle the debt crisis and prevent the contagion from expanding further, yet as uncertainty widened, demand for gold surged as investors seek to protect their wealth.

The metal opened the session in Asia today at $1728.45 per ounce, and recorded the highest at $1732.84 and the lowest at $1725.63, and is currently trading around $1729.19 per ounce, yet is expected to incline and extend the gains recorded earlier.

Gold is moving in line with developments seen in Europe, which remains the main focus in the market as all eyes are looking forward to European leaders and the European Central Bank to quell jitters and resolve the debt crisis this week

However, the sentiment is still shaky and mixed, where fears renewed after the rating agency S&P threatened the credit rating of the euro-zone nations and the European Financial Stability Facility with a possible downgrade, while hopes are seen in the market as European leaders seek to create a strong rescue plan with cooperation with the European Financial Stability Facility (EFSF), the European Stability Mechanism (ESM), the International Monetary Fund (IMF) and the European Central Bank (ECB).

According to the Financial Times (FT), European officials seek to create what so-called bazooka to tackle the debt crisis, where officials provided new plan to be discussed by leaders during the 2-day summit, as the plan suggests that the EFSF could run along with the ESM, also supported by the IMF, which in result supports the ECB to act a defensive line to maintain the financial stability in the euro-area region.

The EFSF 440 billion euros will continue running with the new facility joining the yard with 500 billion euros in mid-2012, which in result doubles the firepower of the European rescue fund. Furthermore, changes to the European Union (EU) treaties that include forcing tougher budget rules for the euro zone could create a credible financial firewall, which in result could support the ECB to increase its intervention in the European indebted bonds.

Greece supported the sentiment a bit today, where the Greek Parliament approved the austerity package for 2012 set by the new interim government led by the New Greek Premier, Lucas Papademos, who set tough fiscal goals that came in line with EU and IMF requirements, where Greece must show commitment and meet targets this year in order to obtain the approved sixth tranche of 2010's bailout package and get the fresh new package of loans (second bailout package).

On the other hand, Chinese rating agency, Dagong Global Credit Ratingdowngraded the Italian debt ranking to BBB from A- on negative outlook for growth prospects, where the agency explained that yields will continue to incline as long as European leaders find no solution and the debt crisis continues to worsen.

Silver also traded within narrow levels, where after starting the session today at $32.70 per ounce, the metal set a high of $32.75 and a low of $32.43, and is currently trading around $32.67 per ounce.

Among other precious metals, platinum gained 0.75% or $11.50 per ounce after opening the session at $1525.50 per ounce, where the metal is currently trading around $1353.00, after recording the highest at $1538.13 and the lowest at $1520.00 per ounce.