Gold Rallies to 2012 High of $1789, Support 1779.1

Gold futures prices extended its rally to the year’s high of $1789 as market kept confined attention to the preponderance of easy global monetary policy and liquidity measures.

The immediate delivery bullion therefore settled with modest gain of 0.85% at the COMEX and the same has been observed at MCX.

The US equities got a solid footing yesterday owing to the strong data releases while the Europe still struggled amid skepticism of Greek ability to tame the entire crisis

The German business confidence rose to the highest level in seven months which sent Euro to the highest level in 10 weeks. The better than expected US releases would have dampen the dollar’s haven demand

Holdings of the SPDR trust, world’s largest gold backed exchange traded fund, increased to 1282.79 tons from 1281.28 tons as on Feb.23

OUTLOOK

Gold futures prices at the early trade of Globex took a back seat after rallying to the year’s high of $1789.

Chinese benchmark rate dropped the most to 20.50% in a month as the reduced CRR took effect from today to help ease cash squeeze, estimated about an addition of 400billion Yuan to the financial system.

This would have supported the Asian equities but the Chinese bourses are still stumbling with mild losses; while the others are heading for weekly advance as the US reports yesterday beat the estimates. Euro at present moment slid a bit while the dollar index rallied and pressurizing the metal.

Going ahead we expect Gold to revive from the pit as investment demand showed substantial improvement in buying exchange traded products which are now standing at 2391.866 tons, just 1.11 tons less than the record holding in December2011.

Reports today from Germany may show GDP probably have grown by 1.5% in the Q4 YOY. However, exports would have declined due to the crisis and so capital investment also likely to be reduced.

This would have created pressure on the Euro, while dollar could get support from the US home sales and confidence data which are most likely to improve in the evening. Therefore gold prices could retreat a bit in the evening.

But it is ECB who is expected to launch the second Longer Term Refinancing Operation (LTRO) by next Wednesday to add an additional 1trillion Euros or unlimited 3-years money lending with hope banks to plow these funds into the periphery bond markets.

Anticipating so, Euro is likely to leap which will then tie gold as well. Hence, we recommend remaining long for the metal at lower prices for the day.