MCX Gold Holds On To Gains

MUMBAI-INDIA (July 16) MCX Gold futures are trading slightly higher in the early European session today despite strong gains in the Indian Rupee and weakness in the international gold futures.

The Indian rupee jumped over 1% on Tuesday after the Reserve Bank of India hiked short term rates late on Monday in the first strong measure to support the currency. The Indian rupee traded at 59.43 as of 10.40 a.m. against Monday's close of at 59.89/90 per dollar on RBI's actions. Government bonds slumped and interest rate swaps surged.

However, stock markets fell sharply, with the BSE Sensex trading down 250 points and the broader Nifty benchmark dropping over 80 points. RBI's actions send a strong signal that there will be no monetary easing later this month, something that markets hoped for after headline inflation stayed under 5% in June.

MCX August bullion futures are trading up Rs 22 at Rs 26460 per 10 grams. The counter opened higher trying to cover yesterday’s losses of more than 1%.

International August gold futures moved up after trading lower earlier in the session. It was recently seen trading at $ 1284.6 per ounce on the COMEX division of New York Mercantile Exchange. Yesterday, it climbed $5.90, or 0.5%, to settle at $1,283.50 an ounce following a loss of 0.5% on Friday and a gain of 5.4% last week. The contract touched a high of $1,293.60 in electronic trading.

Gold got a boost last week from Bernanke’s statement that the central bank wouldn’t be in a hurry to raise short-term interest rates even after the unemployment rate comes down markedly.

Bernanke is due to testify to Congress on Wednesday and Thursday. The Fed’s stimulus program is viewed by many investors as a key driver in boosting the price of commodities as it tends to depress the value of the dollar.