By FXEmpire.com

The Asian equities are trading positive and even Chinese equities gained the most in a week after the government signaled it will delay tightening bank capital rules and investors speculated monetary policy would be eased to prevent Europe’s debt crisis from harming the economy. Further China’s biggest auto-dealer association, asked Car producers to scale back their sales targets or sweeten incentives as the worsening glut of vehicles across the showrooms, dealerships is unsustainable and may support some gains in metals. Besides, the European Union and Germany were making an urgent plan to rescue Spain’s banking sector. The plan requires less austerity measures for Spain, which does not need to accept close supervision from its lenders either, with the rescue fund at least amounting to 80 billion Euros. In this context, investors may expect glimmer of hope to solve the European debt crisis and may boost market sentiment extending gains to metals.

From the economic data front, the leading index from Japan may decline slightly due to deteriorating economic sentiments while from UK the PMI services are likely to remain suppressed and may weaken metals. The Bank of England is also expected to declare its interest rate and may opt to keep it unchanged after recent easing and no change from its neighbor ECB. The BOE may also wait and see the economic developments prior to any easing, as economies from Asian to Americas resemble weakness. From, the US the initial jobless and continuing claims may also increase after increased labor participation and lower non-farm jobs addition. This may further weaken Dollar index in late evening and support some bargain buying in metals pack. Therefore, we expect metals to remain on the gaining side in today’s session due to strong equities and increased speculation over easing. However, weak economic releases and increased jobless claims may restrict much gains.

Gold slipped yesterday from a fresh four weeks high after the ECB president underscored limitations to policy tools. This means that whatever we thought in terms of easing or bond buying or rate cut to cool the market, were just a forbidden act while, the pressure would be lying on price stabilization. So, gold future that closed at a premium over the spot had a gap down opening today and is quoting down by $12.

The Euro although is hovering near its two weeks high, at the early trade, it fell against the dollar on intraday. However, gold may again bounce back today evening with a focus on Fed chairman’s testimony about the US economic outlook later today. Market therefore quickly bends its eyes to the Fed as the next best hope for an additional monetary stimulus. The dollar is therefore also showing weakness as the aspiration for easing rose after Fed vice chairman indicated vulnerability for US to setback. Although Euro is staged for down side risk once again after ECB did nothing on monetary policy front gold should have went down. But that reigniting market expectation for a new wave of easing with slight hint form Fed personnel which may support the metal for an upside move in evening. Spanish 2billion bond auction later today would be an acid test for the Euro to hold yesterday’s gain. Hence, till the European hours gold might remain strenuous after which it may revive.

Reports today may indicate higher US jobless claims after participation rose and the nonfarm payrolls came disastrous last week. All these and as discussed above, dollar may weaken in the evening and thereby supporting the metal.

Silver futures prices are also quoting down at the early session owing to the weak Euro after ECB disappointed market hopes without any indication for further easing. The Asian equities are taking cues from the overseas and are trading with modest margin and are supported by the talks of Chinese easing. Reports today may indicate higher US jobless claims after participation rose and the nonfarm payrolls came disastrous last week. In evening, the Fed testimony has to be watch for where the chairman may indicate the shape of the US economy and is certainly seems not to be at a good shape. Hence, market expectation for easing has increased.

Originally posted here