Gold continues to trade narrowly ahead of the Spanish budget announcement

Gold fluctuated heavily during the session yesterday on mixed fundamentals and mixed sentiment; however, the metal was able to end the session with gains after the upbeat ISM manufacturing index from the world's largest economy, which supported the sentiment to improve slightly in the market after the huge load of downbeat fundamentals from the euro zone raised pessimism and volatility in the market.

Gold started the session today at $1677.68 per ounce and added after then 0.14% or $2.40 per ounce to currently hover around $1680.08 per ounce. The metal recorded so far a high of $1680.60 and a low of $1676.45 an ounce.

Today, with the lack of major fundamentals from Europe and U.S. markets will be tracking the announcement of the Spanish 2012-budget, especially after the Spanish Premier announced that the nation will adopt the deepest round of austerity in order to cut spending by around 27 billion euros this year.

The spending-cuts adopted by Spain are expected to relieve markets and restore some confidence, the thing that will strengthen positive demand for the yellow metal as less investors will demand the U.S. dollar to avert risk.

For sure the spending cuts adopted in Spain will help the nation to reduce the huge deficit it handles, but on the other hand, these cuts are expected to weigh heavily on growth and on the overall economy, where more austerity means less government spending, less employment and in result less economic activity. Therefore, the government needs to balance between boosting growth and cutting spending in order to save Spain and shield the nation from following Greece into the debt-trap.

Markets are trading now bullishly supported by the upbeat services performance in China, where the Chinese services sector expanded beyond expectations in March to 58.0 from 48.4, adding some positivity to the market that China may not be affected sharply by the debt crisis as already expected.

Volatility and choppy trading are expected to remain evident during the session today, awaiting the Spanish budget announcement and also the Minutes of the FOMC last meeting, where markets expect no surprises this meeting despite the comments made by Bernanke, who said that further easing is required for the pace of recovery to continue in the U.S., and Of course any unexpected move might bring the dollar south and support market to extend the slight gains seen now.

Among other precious metals, silver added so far 0.32% or $0.11 per ounce to $33.08 per ounce after the opening of $32.97 per ounce. The metal reached so far a high of $33.13 and a low of $32.95 per ounce.

Platinum gained as well, adding 0.97% or $16.00 per ounce to $1666.75 per ounce, after the opening of $1650.75 per ounce. The metal set the highest at $1669.00 and the lowest at $1647.75 per ounce.

Palladium advanced 0.80% or $5.23 per ounce, reaching now around $661.23 per ounce. The metal started the day at $656.00 per ounce and recorded so far a high of $663.25 and a low of $655.50 per ounce.