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MTECHTIPS:-Gold rallies on weaker dollar, Japan ratings cut

MTECHTIPS:-Gold rallies on weaker dollar, Japan ratings cut

Gold futures shot up on Monday after soft U.S. manufacturing data weakened the dollar, while a cut to Japanese credit ratings boosted the yellow metal by stoking fears the global economy remains cool and in need of lower interest rates. Gold and the dollar tend to trade inversely with one another. On the Comex division of the New York Mercantile Exchange, gold futures for February delivery were up 3.42% at $1,215.70, up from a session low of $1,141.80 and off a high of $1,220.50. The February contract settled down 1.84% at $1,175.50 on Friday. Futures were likely to find support at $1,141.80 a troy ounce, the session low, and resistance at $1,208.20, the high from Nov. 21. The dollar has firmed and gold softened in recent sessions as markets prepare for U.S. monetary policy to grow less accommodative, though mixed U.S. manufacturing data gave the yellow metal room to rally on Monday. U.K.-based Markit Economics reported earlier that U.S. manufacturing activity in November expanded at its slowest pace since January, as new export orders fell. The Markit U.S. manufacturing purchasing managers’ index ticked down to 54.8 in November from 55.9 in October. Economists had forecast a decline to 55.0. Meanwhile in the U.S., the Institute of Supply Management reported earlier that its manufacturing PMI dipped to 58.7 from 59.0 in October, though still better than expectations of 57.9, though the dollar slid on profit taking anyway. Meanwhile, Swiss voters over the weekend voted against a proposal to would have required the central bank to hold a portion of its reserves in gold. Gold dropped on the news at first, though many investors viewed the precious metal as oversold afterwards. Lastly, gold saw added demand on news that Moody’s downgraded Japan’s sovereign debt rating by one notch to A1, citing “heightened uncertainty” over Japan’s ability to cut its fiscal deficit following a decision by Prime Minister Shinzo Abe to delay a planned sales tax hike.

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