Gold futures have taken a breather at the early trading strained by the weakening Euro which is trading near its two years low of 1.1877. After the European financial chiefs bought one year extra time for Spain to reach the deficit target and hence implementation of the measures decided in the EU summit last month would be delayed. Therefore, uncertainties again rose about the country’s ability to stem the crisis. Spanish 10-year bond yield again climbed by 11bps yesterday topping the unsustainable level of 7%.
Reports today may also forecast France’s manufacturing would have weakened. Along with that, Italy again urged to the EU for action to put a cap on rising borrowing cost.
The euro therefore seems to remain weak for the day. Although equities are trading at a slight positive note at present, slowing Chinese export from the prior would have strained the government for supporting expansion. China GDP data on Friday would therefore be worthwhile to watch for which is expected to soften, indicating weakness in the world’s second largest economy. Besides, minutes of the FOMC meeting last time will be published tomorrow at the later part of the day which is likely to reiterate the negligence of fresh easing. Anticipating so and the Euro weakness would therefore be keeping the metal under pressure for the day. Said above, we expect gold remaining under pressure for the day and hence recommend staying short for the metal from higher levels.
Silver futures prices have also retreated at the early Globex session followed from the Euro which is hovering near its two years low. Although the Asian equities are trading at a slight positive note, ease in Chinese exports would have indicated a softening GDP number in coming report. Even the EU chiefs bought one year more time for Spain to achieve the deficit target and hence implementation of the measures agreed on EU summit would be delayed. Said so, Spanish bond yield rose to the unsustainable level of above 7%. Besides, Italy again urged for a cap on rising borrowing cost to the European Union. All these are indicating a weaker Euro and hence silver as well is expected to remain under stress for the day.