Gold Tops $1400, Gains In Dollar Could Trim Upside

MCX Gold futures witnessed a recovery from intraday lows yet again as retail buyers poured in the major cities in India, particularly in Mumbai. Asian and European markets eked out small gains and COMEX Gold was also seen adding to its bounce from two and half year lows. The metal managed to test highs above $1400 per ounce and currently trades at $1388.80, up $6.10 per ounce on the day.

Extraordinarily loose monetary policy risks sparking credit bubbles, which threaten to tip the world back into financial crisis, the International Monetary Fund warned yesterday. In its global financial stability report, the fund cautioned that further policy reforms were needed urgently to restore long-term health to the financial system before the long-term dangers of monetary stimulus materialised.

The IMF noted that the global financial crisis could morph into a more chronic phase, marked by a deterioration of financial conditions and recurring bouts of financial instability. In the short term, however, the fund is more upbeat. José Vinals, IMF head of financial stability, noted that spring has arrived to global financial markets where after very rainy days and threatening clouds, we are beginning to see some blue skies and more sunny days.

Meanwhile, US data showed that the business among manufacturers in the Philadelphia region softened slightly in April, the Philadelphia Federal Reserve said Thursday. The bank's business-conditions index edged down to 1.3 from 2.0 in March, though any reading above zero indicates that manufacturers are still expanding. The Fed reported that the index for new orders fell to negative 1.0 in April from 0.5 in March.

The US dollar is quoting just above 1.3000 levels against the Euro, holding onto its latest gains and could trim intraday gains for the yellow metal. MCX Gold futures fell near its recent low yet again buy swing back. Prices are quoting at Rs 25616, down Rs 63 per 10 grams or 0.25% on the day or with 3.54% increase in the open interest. Spot rates in Mumbai are around Rs 26300, excluding VAT and local taxes and with not much of a fall emerging over last two days, cash buying is picking up.