Gold climbs to record high after IMF sale 

(MENAFN - Advanced Currecy Markets [ACM]) The U.S. Dollar appreciated on speculation that the Fed officials are discussing the outlook for record-low borrowing costs at their two-day meeting. U.S. stocks pared earlier losses after Berkshire Hathaway agreed to buy railroad Burlington Northern Santa Fe Corp. for $26 billion. The S&P 500 Index added 0.2% to 1,045.41 at after falling as much as 0.9%. The Dow Jones Index decreased 17.53 points, or 0.2%, to 9,771.91.

Treasuries fell on speculation the Fed will highlight the strengthening economy at tomorrow's policy meeting and maintain its pledge to keep interest rate at record lows for an extended period. The FOMC is expected to leave its benchmark rate at a range of 0% to 0.25%. Factory orders jumped 0.9% in September more than the decline of 0.8% in August. Earlier in the morning session, European stocks declined after UBS posted wider than expected losses and the RBA raised interest rates for the second consecutive month by 25 basis points to 3.5%.

Crude oil: Crude oil rose to a high of $79.63 aided by the rise in commodity prices after Gold reached new highs and also as the factory orders from the US rose 0.9% more than the expected rise of 0.8%. Initial inventory levels showed that the crude inventories dropped 3.5 million barrels while Gasoline inventories rose 500,000 barrels showing signs that the demand for oil has been rising on increased manufacturing and factory activity showing signs on improved economic conditions. Oil was down to a low of $76.64 as the Dollar remained strong in the morning session over weak European equity markets. Official inventory levels as well as the FOMC decision could weigh on the oil prices as concerns over growth outlook would be in focus while rates are expected to be unchanged.

Gold: Gold rallied $34.50, or 3.3%, to a record $1,088.50 as the Reserve Bank of India bought 200 metric tons of the metal from the IMF. Central banks look towards shifting their holding to Gold as the appeal of Dollar is waning on lower interest rates and rising US Debt. This came as a surprise as China was looking to increase holding in their Gold reserves out of the total 403 metric tons put up for sale by the IMF. China looks like buying the rest of the lot which could further boost the Gold towards the $1100

Silver: Silver being closely correlated to Gold, followed its movement and pushed to a high of $17.24 up 4.4% from yesterday's close. Silver looks to match the October high of $18.10 which was highest in 15 months as the Gold looks like making new highs on its way to $1100. Inventory levels of Silver remain same as of last week at 294 tons which may not contribute much to the price movements. The strong correlation with Gold could ease after the volatile trading sessions calm down and a direction is seen in the markets.

EURO: The Euro Zone released a report saying that the Euro Zone will show 0.7% expansion through 2010 and 1.5% in 2011. However the deficit is expected to be 6.9% of GDP, unemployment to peak at 10.9% in 2011 and some member countries will continue to show extended weakness. The Euro climbed to 1.4802 against the Dollar but later declined to a low of 1.4626 as European equity markets declined on weaker earnings report from UBS and global recovery still looking weak. Investors are waiting on the ECB rate decision on Thursday as it decides on the interest rates where it is expected to remain unchanged and Trichet could signal signs of recovery and comment on the interest rate hike timing as well as growth prospects.

GBP/USD: The UK Treasury announced it would inject further capital into two of the economy's largest banks to put them back on stable ground. Royal Bank of Scotland received 25.5 billion pounds while Lloyds Banking Group's aid will amount to approximately 5 Billion pounds. The Pound weakened against the U.S. dollar for the third-day and slipped to a low of 1.6260 holding support at these levels and is expected to be range bound ahead of the BOE rate decision on Thursday. PMI Construction spending fell in October, to 46.2 amid expectations for a rise to 47.2.

Indian Rupee: The Rupee closed lower at 211.70 (Spot: 47.24) after a volatile trading session saw the Dollar growing weaker after a strong morning session. The Sensex closed 491 points down at 15405, the lowest in two months after global equity markets led the decline and outflow of funds increased from the markets. Rupee climbed to a high of 212.51 (Spot: 47.06) after Dollar weakened on rising Gold prices after India bought 200 metric tons from the IMF.

Further weakness is forecasted from the stock markets as FIIs pull out their money over end-of-year profit taking.

The most important data would be the FOMC rate decision to be released from the US as well as the oil inventories along with the Employment Change readings. UK, Germany and Euro Zone will release Services data and Euro Zone comes out with the producer prices.