A shaky day on the equities market lent support to spot gold. The metal traded higher by $30 to $1660 as safe haven status took precedence with European problems rearing its ugly head again.
Spot gold seemed to be off to a rocky start as the yellow metal dealt to a low of $1632 on the heels of a rising US greenback. Worries starting to creep up with regards to Spain's finances, the country's bond yields on international markets rose despite expectations of a new round of austerity measures. The yield on 10-year Spanish bonds in the secondary market rose as high as 5.93 per cent from 5.74 per cent when the Easter break began late last week. This news along with Fed Chairman Ben Bernanke's comments yesterday stating that "the economy is still far from having fully recovered" from the global financial meltdown. This put the pep in traders step as it flashed hopes of additional monetary accommodation.
"Much of the recent caution over gold's prospects has to do with lowered expectations of global liquidity growth; in particular, a third round of Fed quantitative easing. Our bullish view on gold has always been independent of whether or not QE3 occurs," Standard Bank, said in its daily note.
In the Asian market physical sales slightly up ticked as Indian Jewellers returned to the market. Jewellers reopened their shops after being closed the past 20 days to protesting a government plan to double import duties on gold to 4%. The merchants were quoted as saying they will not strike again until at least May 11 which is a good sign considering the Akshaya Tritiya festival begins on April 24 and is one of the busiest buying times for the yellow metal.
Spot silver couldn't quite keep up as a negative Dow Jones Industrial Average weighed on the industrial metals. The dow shed as much as 200 points at one point to trade to 12,750. The stock market extended its longest and deepest slump of the year, as the nightmare of European debt and the beginning of uncertain corporate earnings reports at home worried investors to shed positions. Silver slumped to $31.17 before recovering to trade above $31.60. The gold silver ratio traded higher at $52.40, breaking our short term target of 52.26. Next stop for the ratio is the march high of 52.57.