Gold Witnesses Pre FOMC Chills

Gold.....

Gold witnessed a familiar correction today as traders booked profits ahead of the US FOMC meet though the worries triggered by the Cyprus banking crisis kept buying support in place for the yellow metal. Prices had shot up in last session, topping three-week highs of $1615 per ounce as Cypriot government rejected a EU proposed bank levy. The metal felt the useal pre FOMC chills today and came off levels near three week highs in electronic moves today to trade at $1607, down $4.30 per ounce on the day.

Gold rallied last night even as the US dollar strengthened to a four-month high of 1.2844 against the Euro after the Cypriot government overwhelmingly rejected a EU proposed bank levy. However, the greenback pared back some of these gains and was quoting around 1.2940 levels against the Euro today. Eurozone finance ministers have assured that they still stood ready to help Cyprus after the island's parliament voted down the bank deposit levy. This boosted the confidence of the market players and decent gains have trickled in the European equities today.

Former ECB president Jean-Claude Trichet said today that he was confident an appropriate solution would be found for Cyprus's banking crisis, despite lawmakers rejecting contentious bailout terms, according to media reports. The will of the international community to help is obvious, and I am confident that they will find an appropriate solution, Trichet stated. We need to be extremely cautious, extremely prudent when imposing cuts on the private sector in any rescue plan, Trichet added, but said he did not see a risk of financial contagion with whatever solution is finally decided.

FOMC decision could be a critical one for Gold today. The Fed policymakers may continue to suggest that there will not be any imminent changes to the pace of QE and that should provide a floor to the gold prices. The yellow metal jumped in local markets yesterday but witnessed a gap down opening today and slipped further once the Rs 29800 per 10 gram levels gave up. The counter quotes at Rs 29695 per 10 grams right now, down Rs 76 or 0.60% with a 9% drop in the open interest.
Source by Commodity Insights