Chennai: Last week, gold prices declined below $900 an ounce. At the outset, a short-term weakness seems to have fully set in gold, despite a minor recovery on Friday to $889.
A major reason for gold’s fall last week was the strengthening of dollar. With the US President, George Bush, saying that things are likely to look up from this week, we may see gold’s sheen wearing off a little more this week. Among other dampeners for gold last week was the World Gold Council’s report for the first quarter of this year. The report shows fall in demand across all sectors.
Developments
In particular, jewellery demand has declined sharply in the first quarter, basically since gold prices had ruled high during the period. It even touched a record $1,034 on March 17. The overall indication is that physical demand for the yellow metal is yet to see any significant pickup. In the futures, too, there have been interesting developments, signalling this fall.
Long speculators have been cutting down their holdings. Open interest of long speculators, who make up 47 per cent of the non-commercial holdings in gold, has declined to 2.02 lakh from 3.15 lakh that was witnessed when gold was at its peak. Other long position holders also seem to be shedding their holdings.
Marriage season
Also, gold has been unable to cash in on certain bullish signals, signifying weakness. However, the technical charts indicate oversold positions, indicating that things could turn around. In the medium term, there are a few positive things to look for in the case of gold.
One, the stable price in the yellow metal has lead to some buying in India and Europe. This could translate into gains in the second quarter, which could also report a pick up in the yellow metal. Two, with Indian marriage season ahead, there could be some physical demand as well.
Dollar weakness
Technically, gold could be supported at $875. If it falls below that, then the next level of support is at $850. If that is breached, then the 50 per cent retracement from $639 to $1,032 could come into play; that is $836. On the upper side, gold could first face resistance at $912.52 and if it goes past that, it could face another hurdle at $951.99.
Remember, gold has been unable to move past $952 in the last couple of weeks. Analysts and experts still hold the view that, in the long-term, gold has the potential to scale $1,500. Dollar weakness is again seen helping it to reach that level.
Silver will also follow gold’s cues. It is seen supported at $16.35. Resistance is seen at $17.02.
Metals
Prices of metals are seen supported due to supply concerns. Rise in oil price, leading to increased costs, is likely to affect aluminium production and that, in turn, an increase in price, according to Angel Broking.
The continuing production problems are likely to affect demand-supply equation in copper, whose prices are likely to rise. Rising demand, coupled with supply shortage, will propel tin prices.
A major reason for gold’s fall last week was the strengthening of dollar. With the US President, George Bush, saying that things are likely to look up from this week, we may see gold’s sheen wearing off a little more this week. Among other dampeners for gold last week was the World Gold Council’s report for the first quarter of this year. The report shows fall in demand across all sectors.
Developments
In particular, jewellery demand has declined sharply in the first quarter, basically since gold prices had ruled high during the period. It even touched a record $1,034 on March 17. The overall indication is that physical demand for the yellow metal is yet to see any significant pickup. In the futures, too, there have been interesting developments, signalling this fall.
Long speculators have been cutting down their holdings. Open interest of long speculators, who make up 47 per cent of the non-commercial holdings in gold, has declined to 2.02 lakh from 3.15 lakh that was witnessed when gold was at its peak. Other long position holders also seem to be shedding their holdings.
Marriage season
Also, gold has been unable to cash in on certain bullish signals, signifying weakness. However, the technical charts indicate oversold positions, indicating that things could turn around. In the medium term, there are a few positive things to look for in the case of gold.
One, the stable price in the yellow metal has lead to some buying in India and Europe. This could translate into gains in the second quarter, which could also report a pick up in the yellow metal. Two, with Indian marriage season ahead, there could be some physical demand as well.
Dollar weakness
Technically, gold could be supported at $875. If it falls below that, then the next level of support is at $850. If that is breached, then the 50 per cent retracement from $639 to $1,032 could come into play; that is $836. On the upper side, gold could first face resistance at $912.52 and if it goes past that, it could face another hurdle at $951.99.
Remember, gold has been unable to move past $952 in the last couple of weeks. Analysts and experts still hold the view that, in the long-term, gold has the potential to scale $1,500. Dollar weakness is again seen helping it to reach that level.
Silver will also follow gold’s cues. It is seen supported at $16.35. Resistance is seen at $17.02.
Metals
Prices of metals are seen supported due to supply concerns. Rise in oil price, leading to increased costs, is likely to affect aluminium production and that, in turn, an increase in price, according to Angel Broking.
The continuing production problems are likely to affect demand-supply equation in copper, whose prices are likely to rise. Rising demand, coupled with supply shortage, will propel tin prices.
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