Gold prices inched higher on Wednesday after recovering somewhat in the previous session as stronger euro continued to bolster the demand for the yellow metal even as investors wait for some more economic indicators from the U.S and China to gauge whether central banks will continue with economy stimulating measures. Silver prices also gained in early trading on Wednesday.
After sliding for two sessions, gold prices recovered on Tuesday after a report carried on Financial Times revealed that Spain might soon request a bailout. The news immediately boosted the euro as it hit a one month high against the U.S. dollar even as the ICE dollar index, a measure on greenback’s performance against a basket of six major currencies, fell to two weeks low in late night North American trading.
Besides some U.S. economic indicators released on Tuesday pointed that U.S. economy was still not out of the woods, dispelling fears that Fed might curtail its QE3 much sooner than initially expected.
Spot gold inched up 0.04% to $1747.96 while U.S. gold futures for December delivery gained 0.3% to $1,749.90 an ounce.
Meanwhile bullion investors will also keep a close eye on upcoming U.S. housing market data and China’s GDP figures, slated to be released later this week. Both data will provide a fair idea on how central banks will continue with their monetary policies. However, the biggest concern is the imminent spending cuts from Washington.
The looming “fiscal cliff” which will automatically lead to spending cuts estimated at around $100 billion and hike in taxes worth $500 billion from January, will significantly slowdown the economy; however, it is anticipated that the Fed will print loads of cash so that the U.S. economy does not plunge into recession. Rampant cash printing, in turn, will burnish gold’s appeal as an inflation-hedge.
According Wang Tao, a market analyst at Reuters, technical charts suggested that spot gold prices could rise as high as $1,762 to $1,770 an ounce on Wednesday.
