Gold trades sideways, oil still providing support

Thin trading on Memorial Day holiday in global markets

Gold futures traded in a sideways manner today as the global markets struggled to find direction amid thin trading on the Memorial Day holiday. The COMEX Gold futures added about one dollar in the early Asian trades but failed to show any signs of a major breakout.

Gold propped up in the early London trades following an up move in the crude oil futures. Crude oil gained sharply today, reacting swiftly to the news that Russian government has hiked oil export duty to $398.1 starting June 1, making a further dent in the potential global oil supplies.

The NYMEX Crude oil futures for July hit a high of $133.27 per barrel as the tight dynamics of the oil market fundamentals propped up very god buying support even as the other asset classes failed to show much of a deviation of account of Memorial Day holiday.

In the economic news today, European Central Bank Vice President Lucas Papademos said that high oil prices have hit economic growth in the 15 nation Euro zone while at the same time contributing to inflationary pressures inside the Euro zone.

Since June 2007, the ECB has kept the interest rates unchanged at 4%, as the very basic mandate of price stability, something that the ECB inherited from the Bundesbank -.its role model right from the start. This has send the single European currency soaring against its US counterpart, pushing up the dollar denominated commodity assets prices to stratosphere.

The Euro currently trades at 1.5780 against the US dollar and a tight movement can be witnessed in the global currency markets today. This is likely to spell a similar scenario for Gold and it is unlikely that the commodity would gather any further buying support.
MCX Gold trades at Rs 12758, up Rs 24 per 10 grams for the June futures, rebounding from a low of Rs 12710. The open interest is up 1.12% at 2907 lots.