India gold regains on expected ECB & BOE rates

Gold revived yesterday as what we expected in our weekly view on anticipation of ECB and BOE’s rate decision meeting yesterday. Futures at the COMEX and MCX gained to settle 0.26% and 0.29% up respectively.

The dollar index settled 0.33% up from its prior closing on a better than expected US trade balance data.

Global equities settled almost in a positive side after the US trade balance data showed some optimism in economic recovery.

The ECB signaled a July interest rate hike even as higher borrowing cost may exacerbate the crisis that’s threatening to push Greece towards a default.

The BOE also kept the benchmark rate at a record low of 0.50% amid concern that the country’s economy was still too weak to cope with higher borrowing cost.

Holdings in the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund remained unchanged at 1211.56 tons as on 9th June.

The gold-silver ratio slid to 41.22 from 42.01 as on Yesterday.

Outlook:

At the Globex platform gold is seen trading at $1544.30, up by $1.60. Asian equities are trading at a mix at present.

The dollar index is continuing to slump as the treasuries yield remained at a lower side on speculation that the Fed officials will reiterate that interest rate will remain near zero to sustain growth, today, may help the metal to grow.

Japan’s central bank ought to step up stimulus amounted to at least 10 trillion Yen to fetch the economy in growth track after the March temblor which may make the currency to appreciate.

The Euro is appreciating against the dollar after the Fed vice chairman quoted that the housing sector will undergo a long drawn out recovery which may trigger gold to become more worthy.

Strong vigilance on inflation and a probable rate hike in July by ECB coupled with Fed meeting on 21st June, week before the ending of QE2, may lift the Euro and hence gold to get well support from  there.

ECB has also showed reluctance of rolling over its own Greek holdings while it has rejected any direct ECB participation in a second bailout for Greece escalating a clash with government.

US are set to announce its monthly budget statement today which is expected to widen deficits and therefore is likely to support gold.

Overall it seems to be a good day ahead for the metal and hence is recommended to be long for the metal.