Gold, Silver Prices Gain, Metals Rise on Fall in Inventory

European stocks traded higher today after German and France stated that the comprehensive Euro Zone debt plan is being prepared to deal with the crisis. There are expectations that the European governments could reveal a $1.3trillion (940 billion Euros) plan in order to tackle with the debt issues.

Gold prices trade higher by 0.4 percent today, mainly on the back of choppy sentiments in the global financial markets which boosted demand for gold. Additionally, a weaker dollar also provided further support. MCX Gold December contract rose more than 0.8 percent on account of Rupee depreciation and touched an intra-day high of Rs.26,633/10 gms till 4.45 IST today.

Today, silver prices rose almost 1 percent till 4.45 pm IST, taking cues from rise in gold prices coupled with dollar weakness. Silver being an industrial metal also took cues from upside in base metals.

The white metal touched an intra-day high of $30.93/oz and was hovering around $30.77/oz till 4.45 pm IST. On the MCX, Silver December contract gained by around 1.3 percent and was trading at Rs.52,372/kg till 4.45 pm IST.

Weakness in the US dollar coupled with rise in the European equities acted as a positive factor for the base metal prices to trade higher on the LME today. Zinc is the top gainer of the day, as the metals gained almost 4 percent on the LME and around 2.5 percent on the MCX till 4.45 pm IST.

Weekly copper inventories in warehouses monitored by the Shanghai Futures Exchange declined sharply by 12 percent to reach at the level of 87,726 tonnes. This acted as a supportive factor for the red metal to surge more than 3.5 percent on the LME and touched an intra-day high of $7071/tonne till 4.45 pm IST.

Nymex crude oil gained by 1.7 percent till 4:45pm IST today, taking cues from a weaker dollar. Prices are currently trading at $86.73/bbl after touching an intra-day high of $86.84/bbl. On the MCX, crude oil prices gained around 0.9 percent and was hovering around Rs.4330/bbl till 4:45pm IST.

According to the International Energy Agency (IEA), Libya’s crude oil production will reach 400,000 barrels a day in fourth quarter of the current year with total output to reach upto 600,000 barrels a day by end of the whole 2011.

Outlook

We expect gold to trade higher today, on account of a weaker dollar coupled with ongoing uncertainty in the global economy which will boost demand for the yellow metal.

Taking cues from upside in gold prices along with dollar weakness silver is also expected to trade on a positive note today.

Today, base metal and crude oil prices have taken cues from a weaker dollar coupled with rising expectations that European leaders will come up with a plan to fight the debt crisis over the weekend. But prices will remain susceptible to downside pressure in case of any negative news or development with respect to the European economy.