Gold Up After Meltdown, COMEX Futures Still Under $1300

Gold.........

MCX Gold futures found a floor today as global prices edged up after a massive spate of selling in last two sessions. The yellow metal tumbled to fresh two and half year lows under $1270 per ounce today on worries about a possible tapering of the asset purchases by the US Fed. However, the metal launched a recovery in electronic moves as European stocks edged up and bargain hunters chipped in. The commodity quotes at $1292.90, up $6.70 per ounce on the day right now.

Gold has been hit very hard this week as the Federal Reserve Chairman Ben Bernanke said on Wednesday that the central bank may start to scale back its asset purchases later this year if the economy continues to strengthen, as the central bank expects. The Fed, which kept monetary policy on hold after a two-day meeting, signaled greater optimism about the economy, forecasting that the unemployment rate could fall to 6.5% by 2014, one year sooner than the central bank had previously estimated.

While this made most of the risky assets take a lot of drubbing, the US dollar marched upwards. Dollar hit a two-week high of 1.3161 against the Euro yesterday before easing slightly today. The equities also paced up in Europe after St. Louis Fed President James Bullard stated that the decision by Federal Reserve to lay out its plan to reduce the pace of asset purchases over the next year was badly timed.

In a statement explaining his dissent from the Fed's policy statement, Bullard said the central bank should have waited for more tangible signs that the economy was healing and that inflation was no longer moving lower. He noted that the Fed trimmed its own forecast for GDP growth and inflation in 2013 and made investors turn around from the downward swoon witnessed after the Fed meet.

This is supporting gold too. However, with an all-important trigger of $1300 having already broken in a convincing manner, room for upside gains looks limited for gold. The yellow metal might endure another sell off if this mark fails to overcome in evening. MCX Gold futures slipped today but were largely in a tight range, as the Rupee remained weak. MCX Gold futures for August moved in a corridor of Rs 26727-26957 per 10 grams and currently trade at Rs 26776, down Rs 93 per 10 grams or 0.35% on the day with 5.25% increase in the open interest.

Source by Commodity Insights