News Column

Gold Ends Lower On Global Cues

August 4, 2014

WASHINGTON (Alliance News) - Gold futures ended lower Monday, on cues from rising global equity markets prompting investors to seek riskier assets with little or no significant economic data release for direction. Investors also continued to mull over the state of the US economy and the possible timing of the Federal Reserve's rate hike.

Meanwhile, the Finance Ministry of the Government of India indicated there would be no easing in its gold import curbs any time soon, reasoning that the move could impact the country's Current Account Deficit situation due to the geopolitical tensions prevailing in Iraq and other places. India is one of the largest consumers of gold in the world.

Gold for December delivery, the most actively traded contract, dropped USD5.90 or 0.5% to close at USD1,287.70 an ounce on the Comex division of the New York Mercantile Exchange on Monday.

Gold for December delivery scaled an intraday high of USD1,296.40 and a low of USD1,287.00 an ounce.

On Friday, gold futures ended higher on some disappointing data from the US with employment rising less than expected with unemployment rate increasing. Last week, gold futures shed about 0.7%.

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, remained unchanged at 801.84 from its previous close on Monday.

The dollar index, which tracks the US unit against six major currencies, traded at 81.33 on Monday, up from its previous close of 81.31 late Friday in North American trade. The dollar scaled a high of 81.38 intraday and a low of 81.29.

The euro traded lower against the dollar at USD1.3421 on Monday, as compared to its previous close of USD1.3432 late Friday in North American trade. The euro scaled a high of USD1.3432 intraday and a low of USD1.3410.

The US economic calendar is relatively light this week, with the ISM services and factory orders data due on Tuesday before reports on trade balance and weekly jobless claims due out later in the week.

On Thursday, the European Central Bank, which provided additional stimulus last month, will announce its policy decision.

In economic news, Portugal's central bank unveiled a plan to rescue one of the country's largest lenders, Banco Espirito Santo, late Sunday after it reported a record EUR 3.6 billion first-half loss. The plan provides the general activity and assets of the troubled BES to be transferred immediately to a new company called Novo Banco.

The equity capital of Novo Banco, to the amount of EUR 4.9 billion, will be fully underwritten by the Resolution Fund set up by Portugal in 2012. The loan granted by the State to the Resolution Fund will be temporary and replaceable by loans granted by credit institutions. The funding of treasury will be repaid eventually by the sale of the new institution and this will safeguard public money, the finance ministry said.

Meanwhile, India's central bank is widely expected to leave its interest rates unchanged on Tuesday as it awaits more signs on the price front to confirm a slowdown in inflation.

The repo rate, the rate at which the Reserve Bank of India lends to banks, is likely to be maintained at 8.00% for the third straight policy meeting. The rate has been raised by 75 basis points since Raghuram Rajan took over as the head of the central bank last September. The central bank is also expected to retain its reverse repo rate at 7.00%. The reverse repo rate is the rate at which the central bank accepts deposits from banks. The cash reserve ratio is also likely to be retained at 4%.

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Source: Alliance News

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