The marriage season Gold demand coupled with a weakening INR in India has helped push the gold prices higher. The weak Rupee which has declined 20% in a year has helped gold to reach an all-time high of 29,600 in Indian markets despite the fact that Gold in U.S. dollars is yet around 14% lower from the all time peak with no major momentum in either direction. Weakening in the Indian economic performance, its investment-grade rating & political uncertainty are driving the INR lower & inversely pushing Gold Prices up, thereby motivating people to seek gold for a safety.
ECB interest rate announcement this Thursday, the U.S. April non-farm payrolls and unemployment rate on Friday will be pivotal to gauge the short-term direction of Gold. MCX Gold, Silver trading may remain subdued ahead of ECB rate decision due later during the day. USD/INR May Futures up by 0.55% at 53.5575 and a weaker INR accelerates the demand for Bullions.
Bullion buying accelerated after a report showed U.S. economic growth cooled in the first quarter as businesses cut back on investment. Some safe-haven buying also supported Gold prices after a credit downgrade of Spain’s sovereign debt by Standard & Poor’s.
Gold traders are more bullish after central banks expanded their bullion reserves and hedge funds increased bets on a rally for the first time in three weeks. Mexico, Russia and Turkey added about 44.8 metric tonnes valued at $2.39 (Rs 125.69) billion to reserves in March, IMF data show. Fund managers raised their so-called net-long positions by 2.5% according to the Commodity Futures Trading Commission. Options traders are also bullish, with the most widely held contract on futures traded on the Comex conferring the right to buy at $2,200 by July, 33% above prices now. The seven most popular options give owners the right to buy at prices ranging from $1,800 to $2,300, bourse data show. The net-long position is still 56% below the peak reached in August. That provides “ample room” for new long positions. Investors own 2,389.6 tonnes in bullion-backed exchange-traded products, within 0.9% of the record reached on March 13.