Indian physical demand of gold and silver keeps the market high

The FX markets stole the show yesterday with the euro, in particular, in the limelight as it continued its trend downward.  It has now moved lower in five of the past seven trading sessions and is attempting to cling above the pivotal area of 1.29.  The currency has been pressured as investors become increasingly wary of the peripheral Eurozone economies and the seemingly tenuous plans to save them.  The Spanish Treasury sold approximately 4 billion euros of three and six month treasury bills at auction earlier today with Spain’s borrowing costs now moving higher from its previous auction.

Despite the euro’s downward trend, gold has managed to hold its ground and is consolidating nicely in the $1,760 – $1,780 range over the past week.  It has been buoyed by Indian physical demand as well as an IMF release highlighting central bank buying in July and August.  Indian demand took off yesterday as Rupee appreciation caused a 2% decline in Rupee gold.  Demand should remain robust as the festival of Diwali approaches on November 13th as well.  On the central bank front, South Korea increased their gold holdings by nearly 16 tons in July, Paraguay increased them by 7.5 tons in July, Turkey by 6.6 tons in August, and Ukraine raised them by 1.9 tons August.