Gold to rebound today on a weak dollar and European Optimism
Gold declined sharply yesterday, cutting some of the gains recorded on Monday, where the metal was affected significantly by the strengthening U.S. dollar which returned to correct some of the losses incurred with the start of this week. But, in general volatility and fluctuations are expected to control commodities and metals today ahead of the critical fundamentals from Europe, especially from the United Kingdom.
Yesterday, the better-than-expected consumer confidence figures from the world's largest economy supported the greenback to correct some of the losses incurred in the previous session and also to regain slight momentum and incline against other majors, the thing that forced downside pressures on precious metals to trade lower.
Gold declined so far 0.28% or $4.65 per ounce to $1676.13 an ounce, compared with the opening of $1670.78 per ounce. The metal set the highest at $1688.05 and the lowest at $1675.35 an ounce.
In general, the U.S. dollar remains weak after Bernanke's comments, the Federal Reserve Chairman, who expects unemployment to reach 10% in the coming seven months and who also announced that the U.S. pace of recovery might slowdown unless policy makers provide more stimuli to support the recovery to continue in the labor markets, which forces downside pressures on the global currency on speculation the Feds might offer another round of quantitative easing soon.
The possible further easing in the world's largest economy comes in favor of the yellow metal, where further easing in U.S. as a start pressures prices to inflate and in result more demand for the metal as a hedge against inflation. In addition, another round of easing drives investors to hold the metal as a safe haven against growth concerns. Others might demand the metal to protect their wealth against violent moves in the market that might be triggered by the U.S. dollar.
We expect the metal to rebound slightly to the upside with the start of the European session, where European markets are seen higher on the comments provided by the Italian Prime Minister, Mario Monti, who sees European crisis almost over after the efforts provided by European lawmakers.
The focus during the European session will be on the United Kingdom, which is to release growth data; with expectations U.K. data might confirm that the Kingdom have contracted 0.2% in the fourth quarter of 2011. With the start of New York session eyes will be track the durable goods report, which expectations an improvement will be seen and accordingly a better-than-projected index might support the U.S. dollar to continue the correction, leaving markets with no choice but to decline.
Among other precious metals, silver slumped as well, cutting so far 0.60% or $0.19 per ounce, trading now around $32.40 per ounce. The metal set after the opening of $32.60 a high of $32.69 and a low of $32.38 per ounce.
Platinum declined 0.85% or $13.97 per ounce to currently hover around $1639.78 per ounce, after recording a high of $1657.75 and a low of $1635.25, noting that the metal started the session today at $1652.75 an ounce.
Palladium also retreated today cutting 0.74% or $4.90 per ounce after starting the session at $659.37 per ounce, to currently hover around $654.47 per ounce. The metal reached a high of $659.75 and a low of $650.48 per ounce.