Spot Gold prices came under pressure today and slipped from a five-month high to $1,183/oz till 4.15pm IST as the emergency fund agreed by the European policymakers will be sufficient to contain sovereign debt risks and help sustain growth in the Euro zone.
This new aid plan has boosted risk appetite and it dented demand for gold in early trade. But we expect Gold prices to bounce back and trade with a positive bias today on strong global demand and the weakness in the dollar. The yellow metal prices usually trade inversely to the greenback.
Copper prices rebounded today as the EU set up a multi-billion-euro emergency fund to prevent Greece’s debt crisis from spreading through the Euro zone. The red metal climbed back above $7,000/tonne today after falling to a low of $6,632/tonne in the last week. This rescue deal will help protect the Euro from a further downside. The rescue deal provided by the EU policymakers has been the biggest in value since the collapse of Lehman Brothers more than two years ago. The ECB also said that it will buy Euro zone government bonds in order to help protect the fractured markets.
Crude Oil prices rebounded today and traded above $77/bbl as the EU new aid plan provided a boost to sentiments and raised demand for higher-yielding and riskier investment assets. We expect Crude oil prices to trade with a positive bias as weakness in the dollar and optimism over the rescue package by European policymakers will help to lift sentiments and thereby prices.
Outlook
The new emergency fund by the European policymakers is expected to lift sentiments in the financial markets. On the back of this we expect the US dollar to weaken today as hopes of a bailout for the Euro zone may trigger risk appetite in the financial markets and reduce demand for the low-yielding currency.
Gold prices could trade with a positive bias today on strong global demand and the weakness in the dollar. On the back of this rescue package we expect Copper prices to stabilize as economic concerns will finally take a back seat. Crude oil prices will also take cues from the weaker dollar and the latest development of the EU aid package worth almost $1 trillion.
