By FXEmpire.com

This morning Gold is quoting a substantial percentage up at Globex and the Asian equities nudged up ahead of the much awaited ECB meet later today. Market could still be bit nervous as Spain intimated sign of distress and being shut out of the credit market. The Euro also jumped on hopes of global central bank policy action and the same is being expected for gold. Market will be eyeing the ECB meet closely later today. We believe either a rate cut or a resumption of bond buying is likely to be adopted. Even a third round of ultra cheap ECB loans to banks remains on the card.

However, any rigid decision may be unlikely before the Greek re-election on June 17, but the week’s volatility has inspired speculation for an early stance by the ECB. Euro although seems to be bit strong on the said anticipation, sentiment would be hardly helped as several German banks were downgraded for emanating increased risk. Notably, keeping aside the ECB anticipations, the yield premium of Spanish debt over the German bonds stretched to the Euro area record of 531basis points and that would have kept Spain out of credit market. So, the Euro may be wired from where gold may draw refuge while a mere Euro zone GDP reading may restrain the currency. Hence, gold might have a restricted upside move during the European session. Nevertheless, during the US hours the increasing labor cost may help the metal to gain fueled by the anticipation of Bernanke’s testimony of a failure to prove a good shaped US economy. Said so, we recommend staying long for the metal from lower levels but gains could be restricted as discussed above.

Gold in India climbed to a record on June 2 after the rupee fell to an all-time low against the dollar, while global prices are down 16 per cent from a peak reached in September. The jump in scrap sales adds to evidence of slowing demand in India that may lose its spot as the world’s largest bullion market in 2012 to China, according to the World Gold Council (WGC).

Silver futures prices are also quoting higher today at the early trade amid higher Asian equities and optimism ahead of the ECB meet later today. As discussed above, the market will be eyeing the ECB meet closely later today. We believe either a rate cut or a resumption of bond buying is likely to be adopted. Even a third round of ultra cheap ECB loans to banks remains on the card. However, any rigid decision may be unlikely before the Greek re-election on June 17. Silver would therefore be well supported from the market optimism. However, the Euro area highest bond premiums may restrain the Euro and therefore the gain might be limited for silver as well. We therefore recommend remaining long for silver from lower levels as we are expecting the US session could be well supportive for silver anticipating the Fed testimony will be failure to show a good picture for the economy tomorrow.

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Originally posted here