Another week comes to an end, while the shiny metal is still trading below the level of $1700 per ounce, yet advanced slightly over weekly basis. The European debt crisis continues to affect the market, as leaders prepare for the summit on October 23, awaiting the steps to be taken to tackle the debt crisis, especially after Slovak Parliament was able to pass the expanded powers of the European Financial Stability Facility, which became ready for use to recapitalize European Banks and bailout debt-burden nations. Gold opened the session today at $1667.77 per ounce, and recorded the highest at $1677.60 and the lowest at $1660.75, and is currently hovering around $1675.90 per ounce. The Slovak Parliament passed the expanded powers of the European Financial Stability Facility, following the rest of the euro zone parliaments’ approval, giving the Facility the green light to use the expanded quantity of 440 billion euros to recapitalize banks, buying bonds in the secondary market and finally providing debt-burden nations with bailouts, which provided the common currency with more strength to hold onto the gains recorded earlier this week. In light of the heavy fundamentals released during the week along with comments and speeches from lawmakers in Europe and the world’s largest economy, markets returned to be normal and less volatile with all eyes still focused on the European leaders’ summit on October 23, while European finance ministers start a two-day meeting today to discuss the current situation in Europe, the mechanism of using the European rescue funds and the Greek case. We described before the relationship between the U.S. dollar and the metal, which could move with or against the dollar depending on the current situation in the market, where gold could move in the same direction with the dollar in case investors demand the metal as a safe haven; however this appeal has been weakening lately due to the acts from CME group and Shanghai Exchange of raising margin requirements on gold futures to make the metal less attractive and to control the rapid incline seen before. Gold could also move against the U.S. dollar when investors demand the metal as a normal commodity, yet gold could incline with a strengthening dollar in case rising inflation and high level of uncertainty were seen, due to the demand for gold, which seems to be protecting wealth over time, as a hedge against inflation and uncertainty. In our case, the metal is moving against the dollar for a certain extent, yet affected by other factors, but the main effect remains from the U.S. dollar, which fluctuated during the past week forcing mixed pressures on the metal, but in general the U.S. dollar was biased to the downside, while the metal was positively biased. The dollar index (USDIX) opened this week at 78.71, and recorded a high of 78.77 on Monday and then reversed to the downside reaching a low of 76.79, and is currently hovering around 76.97. On the other hand, gold opened this week at $1638.76 per ounce and set the highest at $1692.10 and the lowest at $1637.54, and is trading around $1677.32 per ounce now. Moreover, Silver also was able to record gains during the week amid the improved sentiment and the weakening dollar, which eased downside pressures forced on dollar-denominated commodities. Silver opening the session today at $31.79 per ounce and recorded a high of $32.24 and a low of $31.19, and is currently hovering around $32.18 per ounce, recovering some of the losses recorded in the past session. |
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