Gold rose to two week highs yesterday as the euro gained with hefty margins against the US dollar. Though sentiments in the euro zone remained shaky overall, investors bought gold as a hedge against increased risks in European region. European Finance ministers may not rescue Greece if it can not contain its budget deficits. Comex gold futures for April month delivery closed 2.73 percent up at $1,119.80/oz. The euro recovered yesterday after losing heavily against the dollar in the last few days. The euro gained 1.26 percent to 1.3770 versus the dollar. The dollar weakened against other currencies as well. The dollar index, a performance measure of greenback against the world’s six major currencies, fell 0.85 percent yesterday. Crude oil took a hefty move forward by rising 3.89 percent to $77.01/barrel and boosted gold’s demand as an inflation hedge. The world’s largest gold ETF, SPDR gold trust, also bought 3.04 MT gold to take its total gold holdings to 1109.42 MT as on Feb 16. Equities rose 1.57 percent as suggested by the MSCI world index for stocks. Domestic gold futures were primarily restrained by rising rupee which appreciated as much as 0.40 percent to 46.1350 during intra-day sessions and limited the upside of gold futures on MCX. Indian rupee closed at 46.2125, an appreciation of 0.24 percent. MCX gold futures traded in the range of Rs. 16,615 – Rs. 16,793/10 gm before closing 0.76 percent up at Rs. 16,731/10 gm. Outlook Gold trades slightly lower at $1,117.30/oz in Asian hours as the dollar index is marginally up. The dollar index may gain on rising industrial production and housing starts in the US. We expect gold to trade lower for the day which could be good buying levels for bargain hunters. However, declining building permits may hamper dollar’s recovery and put a base under the fall of gold’s prices. Euro zone trade surplus is likely to remain same at €3.9 bn and thus, may not have significant impact. MCX gold futures may open lower amid rupee appreciating heavily in its initial trades.

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