Standard: Indian Rate Cut, Stronger Euro Underpin Gold Prices

An Indian interest-rate cut and softer U.S. dollar have provided a modest lift to gold prices, says Standard Bank. Support is coming from physical demand, especially out of India due to upcoming festivals, the bank says. “Helping this physical demand, as well as investor demand, is the surprise decision from India’s central bank to cut its key lending rate by 50bps,” Standard says. A weaker rupee and relatively high rates previously had a dampening effect on Indian demand, “so this unanticipated cut should provide some extra support for the metal as we move into a period of higher seasonal demand,” Standard says. “This morning, precious metals appear to finally be benefiting from the bout of dollar weakness, once again tracking movements in the euro/dollar rate closely.” The euro has firmed following a Spanish auction of short-term debt and stronger German ZEW survey of investor sentiment. As of 9:15 a.m. EDT, the euro was up to $1.3136 after a low of $1.2995 Monday. Comex June gold was $3.90 higher at $1,653.60 an ounce and May silver was 37.7 cents stronger at $31.75.