Gold taking center stage

Gold was stable in Europe on Tuesday morning, not straying too far from its Monday closing levels, with precious metals lacking both enthusiasm and definite short-term drivers.

Spot gold was up $2.10 to $1,722.50/1,723.30 per ounce. On the charts, the next resistance level is pegged at $1,740, while support stands at $1,721 and $1,715.

Among other precious metals, silver fell 13 cents to $33.53/33.57 per ounce - the metal reached its best since November 16 at $34.42 per ounce on Friday before consolidating lower along with the rest of the complex.

Platinum at $1,618/1,628 per ounce was down $3.50,

The Indian currency shot up to trade on Monday at 49.08 after hitting the high of 48.83 last week. The current value of rupee shows a rise of 8.23% from its lowest level in December.

Despite another postponed deadline in Greece, the dollar weakened against the euro on Tuesday, which sent precious metals rallying. The Greek Prime Minister’s meeting is being held so that the Prime Minster can obtain the political support for the austerity measures that would ensure cooperation from international creditors. Perhaps the optimism was owing to reports that the ECB was willing to contribute to a restructuring of Greek debt. However, this is subject to a successful conclusion to the current debt restructuring negotiations.

Being an election year in the U.S., it is not altogether unusual for indicators to be received in positive fashion. Historically, with few exceptions, the modern economy has performed well during election years. Yet what steers the boat has less to do with the performance during elections years than it does with common sense. The fiscal policies have been repetitive and aimed at sparking the engine, yet it must eventually run on its own accord. Market and fiscal trends are apt to change, sometimes violently.

Fiat currencies makes hard asset commodities, such as oil, gasoline and food cost ore as a result. On the other hand, gold benefits as it is held as a store of value. As other investments get punished, consumers become fearful and the prospect of business growth slows, gold is likely to take center stage

There is still no agreement on a restructuring of government bonds - and the euro zone will continue to cast a cloud over sentiment. Greece has postponed a decision on accepting new terms for a fresh bailout until today

In the current market environment, easing inflationary pressures could – contrary to conventional wisdom – turn out to be supportive for gold as it would open the door for further monetary easing in China