Physical Buying Of Gold Bounces Ahead Of Italian Election

Gold prices rebounded Monday after last week`s drop to a 7-month low, as investors stayed cautious over the unpredictable outcome of the Italian elections and their impact impact on the eurozone.

Italians will resume voting on Monday to choose new leaders as the eurozone`s third-biggest economy sustains its longest recession in two decades, and a huge debt load that could push the country back to crisis.

Spot gold is trading around $1585.45 per ounce by 09:46 (GMT+2) after opening at $1580.09, hitting a high of $1586.84 and a low of 1575.09 an ounce.

Gold was also supported by physical buying in Asia after the drop in prices.

In Japan, Prime Minister Shinzo Abe will likely nominate Haruhiko kuroda, Asian Development Bank president as the new BoJ governor. Kuroda will likely favor aggressive policy easing, which will support the shiny metal over worries that it may spur inflation.

Focus in Asia also turned to HSBC February survey of China`s manufacturing sector, which expanded at a slower rate in February, indicating that the world`s second-largest economy is unlikely taking the path of a gentle recovery.

Silver traded at $28.79 an ounce after opening at $28.62, hitting high at $28.87 and low at $28.56 an ounce.

The International Monetary Fund (IMF) said on Monday that both Russia and Turkey plans to raise their gold holdings for the second consecutive month, citing bank’s interest in diversifying some of their reserves into bullion.

The euro bounced from a six-week low to trade around $1.32 levels, but further gains might be limited as uncertainty mounts ahead of Italy’s vote, exit polls be will be shortly published after voting stations close late Monday and into the morning of Tuesday.

The EUR/USD is currently trading at $1.3208 as of 09:45 AM (GMT +2) after opening at $1.3213. The pair has so far set a session high at $1.3223 and low of $1.3180.

The dollar index rose to an almost six-month high, as traders sold gold and other commodities last week, on speculation that the Federal Reserve is debating winding down its monetary easing programs that previously supported gold and weakened the dollar

As of 09:42 (GMT+2), the dollar index rose to trade around 81.49 after opening at 81.56, where it hit a high of 81.64 and a low of 81.47.