Precious metals gained as emerging markets fell and currencies weakened after Fed decision to cut bond purchase by $10 billion.
Investment in safe haven increased and boost up Gold spot to $1272.01 in early morning. Currencies of emerging economies depreciated as Fed reduced bond buying to $65 billion from earlier $75 billion and China HSBC Final Manufacturing PMI resulted in contraction. On average emerging market currencies dropped by 0.40% pushed demand for alternative investments.
All emerging markets are trading negative. Dow Asia fell by 0.98%, Japanese index Nikkei fell by 2.45% to 15007, China Hang Seng fell to 22035 down by 0.48% and India BSE Sensex dropped by 1.02% to 20440.
Yesterday Gold ETF holding increased by 97.4k to 55.9mt.We may see fall in trading volume at China due to holidays on Lunar New Year. It may keep down side pressure on Gold prices.
Emerging markets may face fund out low for short term on Fed stimulus cut that has diverted investment in precious metals, bonds and haven currencies. Increase in interest rate may attract debt flow and support currencies in near time.
For short term we may see appreciation in precious metals prices but continuous cut in stimulus is negative sign for bullions.