Gold Range Bound Ahead of the ECB and Mr. Draghi

FXEmpire   |  February 7 2013 12:51 EST

By FXEmpire.com

With the European Center Bank meeting the focus today, traders are expecting Mr. Draghi to hold rates and policy and at his press conference to remain neutral on the rate of the euro. He is not expected to talk up the euro, which some believe is trading to high. He will choose his words very carefully. Markets today will react to the movement in the euro. Gold prices were slightly up ahead of the ECB policy meeting today which would give a clear picture of the monetary outlook for the eurozone. The upside was also limited on hopes of a brighter economic outlook which has supported industrial metals like platinum and palladium more than gold.

Gold prices are expected to move in a range through the day. However a downside could be seen after the ECB press conference if the economic outlook for eurozone remains positive and unchanged interest rates can also hurt prices.

Yesterday gold gained marginally as traders moved from higher risk assets. Yesterday, Gold was up trading at 1682.05 in early U.S. trading due to some fresh technical buying, some bargain hunting and some short covering. Traders are now looking for some fresh news to predict the next move. Rumors and stories from the euro zone over the weekend have brought jitters back to the markets seeing gold climb from the 1650 range to 1682 since last week. Overall markets have been directionless throughout the day. Beside that political turmoil in Spain raised worries amongst the market participants over the resolution of the debt crisis. Spanish Prime Minister Rajoy faces corruption allegation which is raising worries over the continuation of the governments policies and its leadership. Strikes, protests and riots in Spain do not seem to be easing. This increased the safe haven appeal of the gold. This morning gold is flat at 1679.35. COMEX futures erased early losses and traded slightly higher. Gold futures came under pressure earlier due to the strong dollar against the euro but the metal recovered from early lows on spillover support from platinum.

Holdings of the, New York’s SPDR Gold Trust, remained unchanged on Wednesday from Tuesday. The US Dollar Index (DX) gained by 0.3 percent yesterday on account of rise in risk aversion in the global market sentiments which led to rise in demand for the low yielding currency. Additionally, political tension in between France and Germany showed signs of disagreement over euro exchange rate also acted as a positive factor for the DX. However, sharp upside in the currency was capped as a result of US equities trading on a flat note. The currency touched an intra-day high of 79.93 and closed at 79.77 on Wednesday.

Silver rose 0.1% in yesterdays session. Silver prices traced strength in gold prices. However, weakness in the base metals along with strength in the DX capped gains. Positive economic data from the US, China and Euro zone region in the last week has caused the safe haven buying for the precious metals to reduce as the global economy recovers, but will support industrial metals helping to support silver prices. Silver is trading at 31.848

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Originally posted here