Spot Gold prices were trading in the red till 4.30 pm IST today after rallying in yesterday’s session. Profit booking at higher levels led the yellow metal prices to trade in the negative territory today. However, gold prices would gain back as the economic scenario in the Eurozone continues to hamper the investor sentiment towards riskier investments. The European equity markets continued to decline and were trading in the negative territory till 4.30 pm IST today. Worries of mounting write-downs at Europe’s banks and efforts to reduce budget deficit may hamper growth in the Euro Zone.
Copper prices continued to decline for a second consecutive day this week and has lost more than 2% on the LME till 4.30 pm IST today. The dollar index- a gauge against six major currencies continued to strengthen in the Asian trade and exerted pressure on the dollar denominated commodities including copper. Market sentiments continue to remain bearish with the unfavorable economic data from the larger economies adding to the woes. Yesterday, China reported that manufacturing in the country expanded at much slower pace in May. The slower growth may reduce demand for metals, thus hurting the prices.
Crude oil prices were also trading in the red as the stronger dollar exerted pressure on the commodity prices. Risk aversion has gripped the financial markets as investors remained concerned over the Euro debt issue which is paving way for a second round of recession. Investors are shunning off riskier investments and turning towards safer investments like gold and the dollar.
Outlook
On the macro-economic front, the US authorities are expected to announce economic data on total vehicle sales and pending home sales today. Poor economic data can further act as a negative factor for the markets. Ongoing economic worries coupled with expected negative economic data from the US will lead to further strength in the dollar.
The stronger dollar will make the dollar-denominated commodities less attractive for holders of other currencies. Gold prices will trade with a positive bias as demand for the yellow metal as a traditional safe asset will continue to drive prices higher. Copper and crude oil prices will face strong pressure from the dollar.
