The yellow metal rallied 1 percent on Tuesday, snapping four consecutive sessions of losses as a weaker dollar helped battered commodities stage a comeback.

European Central Bank policymakers said that officials were working to increase the firepower of the region’s rescue fund, boosting hopes the region will be able to avert sovereign debt crisis.

The news pushed the dollar down 0.6 percent against a basket of currencies, making gold cheaper for holders of other currencies.

Spot gold gained 1 percent to $1,644.40 an ounce by 09:00 a.m., after sinking as much as 7 percent to a 7-1/2-month low near $1,530 in the widest daily swing on record on Monday.

“Probably gold is still the strongest commodity which one should buy on declines like the last couple of days we did buy gold at lower levels,” said Ashwani Gujral of ashwanigujral. com.

“It seems crude and silver look a bit weaker. So on declines try to get into gold, but if the dollar starts rising again, you will see them crashing once more but the uptrend in gold is sustainable,” added Ashwani.

“The correction in gold is in fact the first kind of severe decline which was seen in gold, but typically while we have had a pullback to the weekly averages, I think after some kind of slight upward swing, some consolidation gold might resume its uptrend,” said Mitesh Thacker.
Source: http://economictimes.indiatimes.com