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Gold volatile amid choppiness in US dollar


COMEX gold trades in a narrow range near $1320/oz Thursday amid choppiness in US dollar and global equity markets.

The US dollar index trades marginally higher near 92.4 levels after a 0.2% decline yesterday. The index dipped as low as 91.922 yesterday as market reacted to reports that China was ready to slow or halt its purchases of U.S. Treasuries.

The report resulted in a sharp spike in US and global bond yields. Japanese and German yields rose much more and this pressurized US dollar against yen and euro.

China is the biggest buyer of US Treasuries after US central bank. Market players believe that China could make adjustments to their foreign reserves but is unlikely to stop buying US bonds. Market reaction may subside in a day or two.

The yen has risen this week after the Bank of Japan on Tuesday trimmed its buying of long-dated Japanese government bonds in market operations. This has fuelled market speculation that the central bank may reduce stimulus soon. BOJ is targeting yield levels and the alteration in bond purchases could be to maintain the rates. The move does not signify any change in Japan's monetary policy stance.

The sharp volatility in bond market affected equity markets as well. US DJIA index fell marginally yesterday after hitting record high level a day earlier. Overall optimism is still high about US and major global economies.

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