Gold In Consolidation Mode

Gold.....

MCX Gold futures are trading in a modestly negative territory, as COMEX futures remained mired in a tight range in Asian trades. The metal fell as traders booked profits ahead of the US FOMC meet though the worries triggered by the Cyprus banking crisis kept buying support in place for the yellow metal. Prices had surged to three-week highs of $1615 per ounce as Cypriot government rejected a EU proposed bank levy. However, the metal felt the usual pre FOMC chills and came off these levels yesterday. Prices traded in a narrow band of $1608.2-1603.6 per ounce today.

Earlier in the week, Gold jumped even as the US dollar strengthened to a four-month high of 1.2844 against the Euro after the Cypriot government overwhelmingly rejected a EU proposed bank levy. Eurozone finance ministers have assured that they still stood ready to help Cyprus after the island's parliament voted down the bank deposit levy. This boosted the confidence of the market players and decent gains have trickled in the European equities today.

However, the US dollar slipped yesterday night after Federal Reserve Chairman Ben Bernanke said that the labor market is healing but the central bank will keep its aggressive easing stance until it is shown that the gains are durable. In its regular policy meeting yesterday, the Federal Reserve's FOMC announced that it is leaving the overnight lending rate unchanged at 0.25% or less and that it will continue its $85 billion per month asset purchase program.

Gold seems to be consolidating above $1600 now as traders try and assess the strength of the recent rally. The Cyprus government is scrambling to draw up ways to secure an EU bailout after MPs rejected an unprecedented bank deposit levy and could continue to haunt the markets for a while. However, the worse seems to have gotten behind given the surge in European stocks yesterday. The domestic Gold futures slipped well under Rs 29800 per 10 grams yesterday and fell further in the evening moves, closing under Rs 29700 per 10 grams. The counter quotes at Rs 29646, down Rs 35 per 10 grams on the day with 0.42% increase in the open interest.
Source by Commodity Insights