Yesterday, gold closed the session in New York with losses after the German Chancellor, Angela Merkel, provided discouraging comments that disappointed all the eyes looking forward to the October 23 summit, which replaced the optimism seen in the market earlier with pessimism as all thought that European leaders will finally fix the debt crisis once and for all, and investors expected leaders to provide the market with a final plan to tackle and contain the crisis. Gold opened the session in Asia at $1670.42 an ounce, and recorded a high of $1676.65 and a low of $1661.90, and is trading now around $1665.36 an ounce. Merkel’s chief spokesman said that the European leaders will not be able to provide final solution at the October 23 summit and searching for an appropriate plan to end the crisis could take lawmakers more time as Merkel said that it will “surely extends well into next year.” After providing these comments the euro reversed to the downside against the U.S. dollar, which inclined sharply as investors demanded the low yielding currency to avert risk, which in turn pressured the shiny metal to the downside. Moreover, gold is expected to extend the downside movement today as the dollar could gain positive momentum especially after the Chinese economy grew at a slower pace and less than expected, raising fears that China could also follow the rest of major economies and could slow down further in the coming period. We can notice that gold is loosing demand as a safe haven, while the dollar gains the most in the time fears and jitters controls the market, affected by the act of CME and Shanghai Exchange which raised margin requirements on gold futures in attempts to control the rapid incline seen at the beginning of September, where the groups were able to control the bullishness; however affected gold’s appeal as a haven. The U.S. dollar index (USDIX) at 77.18, and recorded a high of 77.30 and a low of 76.94, and is currently hovering around 77.03. Inflation and confidence data are expected from the United Kingdom and the euro area later today, which could affect the sentiment in the European session; however, higher inflation level will not have a deep impact on the market, because the Bank of England expected that inflation could reach 5% this year, where the data is already known and priced in the market, yet a better than expected figures could spread some optimism in the market. Eyes will also be on the confidence figures from the euro area and Germany, where the October Zew survey for economic sentiment and the current situation are expected today, with hopes to see some improvement in Europe and Germany, especially after the debt crisis raised fears and panic over the past two years, which pressured confidence to the lowest levels and caused losses across the board. |
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