Chennai: A rising dollar and an upbeat US stock market have forced gold to pare its gains sharply during the last week. In fact, the yellow metal shed 3 per cent on Friday, to close at $915.20 an ounce for June contracts. Spot gold closed just a dollar more.
The dollar is in for a rebound, an eventuality that has not been discounted by the bulls in the precious metals counter. There are fears that investors, who found safe haven in gold, could now switchover to the equities market. This means, interest for investment in gold could wane. In turn, we are likely to see some short-term weakness in gold.
Crucial support
Technically, too, gold has slid below what was seen as secondary resistance of $921 an ounce. Last week, gold scaled to $952 an ounce. But what has happened ever since, gold touched a record high every time it tried to rise, the bulls haven’t been able to go much far ahead. The highs have always been lower than the previous one.
Though charts show that gold has been oversold, the situation is likely to continue for some more time, till the yellow metal finds a right support. Therefore, gold looks vulnerable to a fall in the short term. However, $907 is now seen a crucial support and below this, gold could decline below $900.
This weakness in gold is also due to factors apart from the currency and equity markets. One reason for the fall is falling physical demand. The high prices have resulted in reduced demand for jewellery, particularly in key consuming nations such as India, China and West Asia. The open positions too have come off to around 4.3 lakh from a record 5.93 lakh during the middle of January.
Gold prospects
In the non-commercial open positions, large speculators are holding 48 per cent, while commercially commercial hedgers are holding 71 per cent of the open positions. But if the equities market gains as also the dollar, the long-term prospects for gold look bright. If Friday’s rebound in the dollar and equities in the US is true, then the long-term prospect for gold is bullish. A growth in the US economy holds possibilities for inflation and that, in turn, could lead to demand for gold.
Gold prospects look good even if the US economy is to be caught in recession. Charts too are bullish in the long term. Indications are bright for a pull back. Therefore, strategy for investors is to buy at dips, possibly once the price goes below $900. According to Angel Commodities, gold has firm support around $865 levels. In the domestic futures market, it sees support for MCX June contracts at Rs 11,700/11,550. Resistances are at Rs 12,450/12,880 for 10 gram.
White metal
Silver, too, is likely to toe gold’s line. Like gold, the white metal is also seen choppy. Angel sees support for the white metal at $16.30 an ounce. Domestic futures could see support for May silver contracts at Rs 22,800/22,400 and resistance at Rs 24,570/25,120 a kg.
Crude looks to rule firm with hopes for rebound in the US economy. Already, it has hit a high of $117 a barrel, but the upside looks limited. Coal’s fall could continue. Base metals are likely to witness volatility, caught between growth and investors trying to book profits. With various governments now expressing concern over food security, there is all likelihood of agricultural commodities witnessing further pressure and declining to reasonable levels.
The dollar is in for a rebound, an eventuality that has not been discounted by the bulls in the precious metals counter. There are fears that investors, who found safe haven in gold, could now switchover to the equities market. This means, interest for investment in gold could wane. In turn, we are likely to see some short-term weakness in gold.
Crucial support
Technically, too, gold has slid below what was seen as secondary resistance of $921 an ounce. Last week, gold scaled to $952 an ounce. But what has happened ever since, gold touched a record high every time it tried to rise, the bulls haven’t been able to go much far ahead. The highs have always been lower than the previous one.
Though charts show that gold has been oversold, the situation is likely to continue for some more time, till the yellow metal finds a right support. Therefore, gold looks vulnerable to a fall in the short term. However, $907 is now seen a crucial support and below this, gold could decline below $900.
This weakness in gold is also due to factors apart from the currency and equity markets. One reason for the fall is falling physical demand. The high prices have resulted in reduced demand for jewellery, particularly in key consuming nations such as India, China and West Asia. The open positions too have come off to around 4.3 lakh from a record 5.93 lakh during the middle of January.
Gold prospects
In the non-commercial open positions, large speculators are holding 48 per cent, while commercially commercial hedgers are holding 71 per cent of the open positions. But if the equities market gains as also the dollar, the long-term prospects for gold look bright. If Friday’s rebound in the dollar and equities in the US is true, then the long-term prospect for gold is bullish. A growth in the US economy holds possibilities for inflation and that, in turn, could lead to demand for gold.
Gold prospects look good even if the US economy is to be caught in recession. Charts too are bullish in the long term. Indications are bright for a pull back. Therefore, strategy for investors is to buy at dips, possibly once the price goes below $900. According to Angel Commodities, gold has firm support around $865 levels. In the domestic futures market, it sees support for MCX June contracts at Rs 11,700/11,550. Resistances are at Rs 12,450/12,880 for 10 gram.
White metal
Silver, too, is likely to toe gold’s line. Like gold, the white metal is also seen choppy. Angel sees support for the white metal at $16.30 an ounce. Domestic futures could see support for May silver contracts at Rs 22,800/22,400 and resistance at Rs 24,570/25,120 a kg.
Crude looks to rule firm with hopes for rebound in the US economy. Already, it has hit a high of $117 a barrel, but the upside looks limited. Coal’s fall could continue. Base metals are likely to witness volatility, caught between growth and investors trying to book profits. With various governments now expressing concern over food security, there is all likelihood of agricultural commodities witnessing further pressure and declining to reasonable levels.
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