Gold turns down as euro slips after poor PMI numbers

Strength in oil & dollar results in tight activity in gold

Gold futures weakened as the US dollar rose against the single currency after the Euro Zone manufacturing and the Services PMI fell in December 2008. The late recovery in the Asian and the London markets also pulled the bullion lower despite appreciation in the Yen.

The U.S. stock-market futures pointed higher Tuesday ahead of an interest-rate decision from the Federal Reserve and the latest quarterly earnings from Goldman Sachs Group. The policy-making Federal Open Market Committee is almost universally expected to cut its target for overnight interest rates to 0.5% from 1%. On its own, that cut isn't expected to have much of an impact, so investors will also be looking for indications on whether the Fed will take other steps, such as injecting more cash into the economy.

An ounce of Gold on the COMEX Division of the New York Mercantile Exchange lost over $ 5 at $ 731.7 an ounce in the late electronic session. The trades were anyways quite lethargic with mild strength in oil and dollar countering the movement in the bullion.

Whereas, February MCX Gold futures rebounded from Rs 12830 the level we had mention in the morning update. Recently it was seen trading at Rs 12854 down nearly Rs 40 per 10 grams. The open interest of the counter also shed 235 lots or 2.13% at 14013 lots. On the economic agenda other than the Fed decision today is the November consumer price index and US housing data.

In the currency movements the single currency dipped against the US dollar after the manufacturing PMI dropped to 34.5 in December from 35.6 in November, while activity in the services sector has edged down to 42.0 from 42.5 in November. The dollar declined against the yen, but stepped higher against the euro ahead of the data and rate decision. The greenback fell 0.5% to 90.04 yen, while the euro lost 0.4% at $1.3642.