Gold gains strength ahead of the second round of ECB LTRO
Gold started the session today biased to the upside, where the metal was supported by the weakening U.S. dollar, which eased pressures forced on commodities. Metals and other currencies trade higher now as the dollar index surrendered all the gains recorded yesterday after the German vote on the second bailout package.
Gold added so far 0.32% or $5.88 per ounce to $1773.55 per ounce after starting the session at $1767.67 per ounce. The metal set so far the highest at $1774.23 and the lowest at $1765.98 per ounce.
The German parliament late yesterday backed the second bailout package worth 130 billion euros for Greece, supporting finance ministers' decision to hand Greece the second financial aid. The parliament easily passed the decision with 496 lawmakers in favor and other 90 against the decision.
Now eyes will be focused on Germany and Chancellor Angela Merkel, with mounting pressures on the nation to expand the capacity of the European rescue fund as the European summit is just around the corner. The European rescue is expected now to combine both of the permanent and temporal facilities.
Germany for so long opposed an increase in the bailout fund; however, now the nation could be forced to provide further aid so G20 nations could provide more resources to the International Monetary Fund, which in turn will support European indebted nations in fighting back the crisis.
The metal could extend the gains and continue the upside journey due to the increase in crude oil prices, which force inflationary pressures on commodities and on gold, which is known to hold value over time and in result the best hedge against inflation.
Moreover, after CME lowered margin requirements on gold futures earlier this month the metal was even more attractive, while the easing to be provided by the European Central Bank today could add more upside pressure on the metal as this move could ease tension in European markets and in result reduce demand for the U.S. dollar in terms of risk aversion.
Critical fundamentals are to be released today, with the main focus on the U.S. and European confidence figures and the durable goods report from the world's largest economy, with expectations the confidence could have improved in both economies in February.
Among other precious metals, silver added so far 0.44% or $0.16 per ounce after starting the session at $35.38 per ounce to currently trade around $35.52 an ounce. The metal recorded the highest at $35.59 and the lowest at $35.34 per ounce.
Platinum was little changed adding 0.01% or $0.25 to $1706.75 per ounce, after recording a high of $1709.25 and a low of $1693.50, while palladium lost 0.25% or $1.75 per ounce to currently trade around $703.50 per ounce after reaching the highest at $705.75 and the lowest at $701.88 per ounce.