Gold To Test Resistance Levels - June 16, 2008

Comex gold futures ended marginally higher on short-covering on Friday, as buyers covered short positions before the weekend and pulled prices up from lower levels.

Investors awaited the outcome of this weekend’s meeting of G8 Finance Ministers. Any comment on inflation at the meeting may fuel expectations for a US rate hike, which could strengthen the dollar, pressuring gold. Nonetheless, with the dollar remaining broadly weak, the outlook for interest rates uncertain, and inflation on the rise, markets remain broadly positive towards the long-term outlook for gold.

Comex August gold futures fell lower against our expectations. As cautioned, in the previous update, fall below $880 forced us to abandon our bullish bias. Moreover, a head-and-shoulder pattern has formed and its neckline broken. This could lead to a sharp decline towards $795 or even lower in the coming sessions. Rallies to $800 and $895 are now expected to cap the upside.

Our favoured view is to expect a fall below $855 to trigger the decline as long as $908-909 caps upside attempts. We believe that the third wave could have ended at $1033 and the fourth wave is in progress right now. We could now be tracking a wave four A-B-C in progress and once the correction ends, a potential fifth wave impulse could be in the making.

Only a rise above $955 would confirm this view. The RSI is in the neutral zone, indicating that it is neither overbought nor oversold. The averages in MACD are still below the zero line of the indicator, suggesting a bearish reversal.

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Only a crossover above the zero line will now restore confidence for bullishness ahead. Therefore, expect gold to test the resistance levels and fall lower subsequently.

Supports are at $863, 851 & 832. Resistances are at $880, 895 & 907.

Worldwide Physical Demand For Gold

Mumbai: Not unexpectedly, worldwide physical demand for gold (jewellery, coins and bars) suffered a setback in the first quarter of 2008, with volume down 16 per cent to about 701 tonnes.

In dollar denominated value terms, demand for the yellow metal reached $20.9 billion, up by a fifth from the corresponding period last year; and more than double the level four years ago.

Going by early indications, jewellery demand is likely to remain muted in the second quarter, a spokesman for World Gold Council (WGC) said at the time of Gold Demand Trends’ first-quarter report release.

With unsettled conditions in financial markets continuing and inflation catching up, gold continues to be buffeted by uncertainties.

Yet, its traditional role as a hedge against inflation and safe haven investment has ensured continued investor interest.

Unusual volatility

The fall in physical buying in the first quarter represents the lowest quarterly figure for five years, WGC pointed out, adding the fall was caused primarily by the sharp rise and unusual volatility in the gold price which briefly touched record levels above $1,000 an ounce in mid-March.

In particular, jewellery demand declined 21 per cent year-on-year.

The WGC admitted that India, the largest market for gold and also the most price-sensitive, continued to suffer from the impact of high and volatile prices.

Jewellery and investment demand at 71 tonnes and 31 tonnes, respectively were both half the levels of first quarter of 2007.

Gold sales during the recently concluded Akshay Thrithiya helped bolster the numbers to some extent.

MCX Is Planning To Open Additional Delivery For Precious Metal

New Delhi: Encouraged by the good response to its Gold Guinea futures contract, leading commodity exchange MCX is planning to open additional delivery centres to facilitate delivery of the precious metal.

"We are planning to have more delivery centers soon," an MCX official said, adding it becomes convenient for players who would like to take the delivery.

Currently, the contract has opened delivery centres at Ahmedabad, Delhi, Mumbai, Hyderabad, Bangalore, Chennai and Kolkata. The delivery centres become important in a mini contract especially when the contract has compulsory delivery norm, an expert said .

'Gold Guinea' futures contract, which can be traded in eight-gram unit, was launched on the MCX on May 8, on the Hindu festival of 'Akshaya Tritiya.' It has received huge response from the participants, the exchange official said.

"This is for the first time a commodity exchange in the country launched a contract that caters to even smallest of retailers. The unit size at 8 gm is quite convenient to trade especially for the retailers who cannot afford to trade in contracts of bigger size," an analyst said.

The Guinea contract has offered the competitive price as compared to physical market where guinea is being sold at 12-14 per cent higher than futures prices.

At 1600 hours today the gold guinea July contract was traded at Rs 9,729 per 8 gram, while that of August delivery at Rs 9,748.

On the first day of the launch, the turnover of both the July and August contracts in terms of volume recorded 181 kg and in terms of value it was Rs 21.5 crore and with open interest on May 9 standing at around 1500 guineas.

However, the average daily volume is 100-120 kg as open interest reached at 13 kg till date, sources said.

Short-Term Weakness Tells On Gold, Despite Minor Recovery

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.

Gold To Test Support Levels

Comex gold futures ended slightly higher on Friday, rebounding from three-week lows. Gold investors, including those in the recently hot exchange-traded-fund market, are pulling out of the metal and returning to stocks as some see the US economic outlook brightening and the dollar putting in a bottom.

Gold’s safe haven sparkle could be fading as markets start to believe that the worst of the liquidity crisis might be over. Gold responded with only modest gains, when the euro and crude oil hit record-highs on Tuesday.

Comex April gold futures fell sharply lower in line with our expectations. As mentioned in the previous update, there are some indications in the big picture now for a large downward correction. A potential head and shoulder is in the making. Daily close below $875 could now open the way for a huge fall towards $830 or even lower towards $795 levels.

Rallies to $908/10 followed by $925 could find good resistance in the coming sessions. We believe that the third wave could have ended at $1,033 and the fourth wave is in progress right now. We could now be tracking a wave four A-B-C in progress and once the correction ends, a potential fifth-wave impulse could be in the making. The RSI is in the neutral zone, indicating a negative divergence, a sign of possible intermediate top, one of the reasons for our expectations of a large downward correction.

The averages in MACD have gone below the zero line of the indicator, suggesting a bearish reversal. Only a crossover above the zero line will now restore confidence for bullishness ahead. Therefore, expect gold futures to test the support levels.

Supports are at $872, 850 & 830. Resistances are at $908, 925 & 936.

Short-Term Weakness In Gold Likely

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.

Online Spot Gold Trading Records Average Sales Of 25 Kg

Mumbai: RSBL Spot (Spot Precious-metals Online Trading), over-the-counter (OTC) bullion trading platform, seems to be attracting traders and investor interest

The company, which has about 150 registered members, outperformed the combined volumes of about five gold exchange traded funds (ETFs) in India.

On Tuesday, the company recorded a volume of 33 kg, 90 per cent more than all gold ETFs. RSBL Spot, which was launched on March 12, records an average daily gold turnover of 25 kg, while it was 10 kg for gold ETFs, said Samir Shah, Vice President, RSBL SPOT.

RSBL Spot is first of its kind electronic trading platform in India with a distinction of giving physical delivery of precious metals. It provides real time price updates with charting and accounting modules which is very crucial for jewellers, who did not have a reliable source for Indian spot prices, said Ulhas of Antara Jewellery.

The promoter of the trading platform, RSBL Bullions Ltd has an annual turnover Rs 5,900 crore. It is the authorised participant (AP) of all the gold exchange traded funds (ETFs) in India and is also the largest creator and redeemer of units issued by these funds.

Gold Prices May Scale New High In Early 2009

New Delhi: The ongoing secular bull market for gold would sustain itself for at least three more years and the yellow metal would probably make a new high as one enters 2009, according to Joseph M Foster, Portfolio Manager, Van Eck International, New York.

Stating that financial uncertainty and stressed credit markets were driving gold prices, Foster, who manages AIG PB Equity Fund Gold and other gold funds, told Business Line here that the gold market was currently going through a consolidation phase. Gold price hit a high of $1,030 an ounce in mid-March this year.

“Once this phase of consolidation runs its course, more investors will come back to gold and will see it move higher as we approach the year-end and probably make a new high as we move into 2009. In the longer term, all the fundamentals are in place for this bull market to sustain itself for at least another three years in my view. You look at the stress in the credit markets, supply demand picture for gold, it is all very positive for the gold environment,” he said.

Foster was here on the occasion of the launch of AIG’s World Gold Fund, which is an open ended fund of a funds scheme that would invest predominantly invest in units of AIG PB Equity Fund Gold.

The AIG PB Equity Fund Gold invests worldwide in stocks issued by companies engaged primarily in the extraction, processing and marketing of gold.

Meanwhile, on whether he expects the International Monetary Fund’s plan to sell 400 tonnes of gold to affect the market, Foster said that any such move would not have much impact at all.

“First of all we are not sure they (IMF) are going to make the sale, as it has to be approved by the US Congress. In the past every time IMF has proposed to make the sale, Congress has voted it down. That remains to be seen. If they do make the sale, that would be done under the auspices of central bank gold agreement. The UMF is part of the agreement.

European central banks are selling gold under this agreement. The members to the agreement (including IMF) cannot cumulatively sell more than 500 tonnes a year. “So IMF’s plan is already pretty much priced in the market. It would not have much impact at all,” he said.

He also highlighted that the easy monetary policy stance adopted by most central banks, including the US Federal Reserve, was a positive move for gold as more liquidity is pumped into the financial system.

Fiery Gold Price Cools Down

The lofty march of gold prices to the top has taken a beating. The metal, which had reached an all time high of Rs 13,500 per 10 gm on March 17 fell by over Rs 2,000 to Rs 11,480 on Wednesday in just 17 days.

Rise in dollar and heavy fall in precious metals in Europe because of profit-taking and liquidation triggered a selling.

As a result, gold fell to $887 an ounce in the international market from its earlier price of around $1,000 an ounce. Gold traders and experts, meanwhile, believe that prices are expected to fall further and so investors are putting purchase on hold.

"Price of the metal has dipped by more than Rs 2,000 and traders have started hoarding gold. But, in the retail market there is no buzz as investors are waiting for prices to deflate further," said president of Gem & Jewellery Trade Council of India, Shanti Patel.

According to Mumbai-based bullion analyst, Bhargav Vaidya, investors are keenly watching the movement of gold prices.

Meanwhile in Ahmedabad, gold trading has increased by four times. "In two days, the trading has increased to around 400 kg per day from the earlier 100 kg," said Ahmedabad-based bullion trader and analyst, Girish Chokshi. "Gold prices in the domestic market may reach Rs 11,000 per 10 grams," he said.

Gold Prices Collapse On Profit Taking

Mumbai: Gold prices are seen collapsing, for the second day running. In the London market, the yellow metal moved below the psychological $900 an ounce to trade at around $895/oz. Silver breached $17/oz.

Fears over recession and decline of the broader financial markets that created liquidity crunch pushed investors into exiting long positions.

The latest CFTC data reveal a mixed sentiment towards the entire precious metals complex.

Exposure towards gold and silver is being scaled back.

According to analysts, during week ended March 25, net fund length in Comex silver declined heavily (down 18 per cent week-on-week).

Net fund length in gold declined by 16,300 lots primarily on the back of long liquidation, even as prices dropped by over $40 during the period.

Interestingly, despite profit taking, overall speculative positions in Comex gold still remain large. They are only 36,000 lots away from record highs reached earlier in the year. This creates a downside risk.

The domestic market continues to reflect global trends. The metal was down, trading at about Rs 11,690 per 10 gm on the bourses. Investors are rushing to sell off. There has no doubt been strong consumer resistance at higher price levels. The question from now onwards is whether investors will return to the market. Gold, it is widely believed, still has some downside left. There is the possibility of prices first touching $880/oz, and possibly move towards $850/oz.

External factors

However, external factors such as inflationary concerns and broader economic concerns, geopolitical tensions and Fed rate easing are likely to stay in the background to prop the market. Some analysts have ruled out the possibility of the metal returning to four-digit prices anytime soon; and surely not $1,200/oz as forecast until recently. As greed pushed the market up, fear seems to be ruling the roost now.

Gold Demand Low-Key, Buyers Eye Falls

Mumbai: Gold market saw low-key buying on Monday as prices hardened taking cues from overseas markets, where continued fund inflows helped the metal rebound from its recent lows.

"Today it is a little quiet compared to what we saw last week," said a dealer in a large private bank. "But people are eyeing levels below 12,000 rupees per 10 grams."

Overseas gold ticked up amid signs of investors returning to the market after a severe fall to a month's low earlier in March.

The metal was supported by bargain hunters using gold as a safe haven asset amid uncertainity in other asset classes.

Gold was down 9 per cent from its all time high level on March 17 at $1,030.80 an ounce.

"There is caution in the market, but at least some buying has started, said Samir Shah of Riddisiddhi Bullions Ltd, a large Mumbai-based wholesaler.

"But demand can really be strong if foreign prices fall closer to $900."

India's wedding season is still on, keeping demand at jewellery shops alive, though the price rally seen since the start of the year has muted buying.

There has been widespread sale of old gold to pay for new, or simply for profit taking, dealers in Zaveri Bazaar have said.

However, on Monday, scrap sales were down that meant traders were buying more of imported gold rather than the cheaper, recycled gold derived from scrap.

Gold, Silver Decline On Lack Of Buying Support

New Delhi: Despite firm global trend, gold prices declined on the bullion market today following lack of buying interest and lost Rs 180 at Rs 13,110 per ten gram.

Trading activity fell due to off-marriage season besides some investors shifting their funds towards rising stock market.

The firming global trend, which normally set prices in domestic markets here, failed to impact the trading activity. The US Federal Reserve cut interest rate by 75 basic points last night to create liquidity and control housing subprime crisis.

Gold climbed by $8.66 to $990.90 an ounce in London. The metal reached a record $1,032.70 on March 17. Silver, rising 16 cents to $19.885 an ounce, failed to impact on the gold prices in domestic market here.

Marketmen said persistent selling by stockists during the off-marriage season mainly pulled down gold prices.

Standard gold and ornaments remained under selling pressure and lost further by Rs 180 each at Rs 13,110 and Rs 12,960 per ten grams respectively. Sovereign followed suit and lost Rs 100 at Rs 10,200 per piece of eight gram.
A similar weakening trend was extended in silver, as the metal for ready delivery dipped by Rs 300 to Rs 24,200 per kg and weekly-based delivery by Rs 90 at Rs 25,880 per kg. Silver coins traded lower by Rs 100 at Rs 27,000 for buying and Rs 27,100 for selling of 100 coins.

Gold Price Trend Hinges On Fed Rate Cut

Mumbai: The US Federal Reserve meet on Tuesday to decide on inter-bank lending rates is expected to set the price trend for gold here. Gold price on Monday hit a historic high of Rs 13,495 per 10 gm.

“Markets has already discounted a rate cut of 50 basis point, anything above will set the course for pricing pattern,” said Harish Galipalli, head of research, Karvy Commodities.

US Federal Reserve move to cut discount rate it charges commercial banks by 25 basis points to 3.25 per cent pushed up gold and crude oil to new highs.

Gold for immediate delivery climbed $22.04 to $1,024.98 an ounce on the London Metal Exchange after touching an all time high of $1,032.70. Dovetailing gold, silver rose 54 cents to $21.205 an ounce, the highest since March 1980.

Crude oil for April delivery rose $1.59 to $111.80 a barrel on the New York Mercantile Exchange, the highest since trading began in 1983 while Brent crude for May settlement jumped by $1.77 to $107.97 a barrel on London’s ICE Futures Europe Exchange.

Tracking global developments, standard gold in India gained Rs 385 per 10 gm to Rs 13,495, before hitting a new peak of Rs 13,560. Pure gold was also up by Rs 385 per 10 gm to Rs 13,555. Silver moved up by Rs 425 per kg to Rs 25,650.

“The yellow metal was in good demand due to the meltdown of equity market and soaring inflation. The US Fed meet tomorrow will set the future price trend,” said an analyst.

Lower rate

In its first weekend emergency action in almost three decades, the Federal Bank lowered the discount rate to 3.25 per cent. The Fed also will also lend to the 20 firms that buy treasury securities directly from it. Moreover, the Fed will provide up to $30 billion to JP Morgan Chase & Co to help it finance the purchase of Bear Stearns Cos, after the Wall Street’s fifth-largest securities firm was close to declaring bankruptcy.

The Fed decision is aimed at restoring confidence after the collapse of Bear Stearns and over $195 billion asset write-down and credit losses worldwide. JP Morgan agreed to buy Bear Stearns for about $240 million, about 90 per cent less than its value last week.

The dollar dropped to record low against the euro and to a 12 year low against the yen. The dollar fell to £95.78, the weakest since August 15, 1995, before trading at £97.16 in London. Against the euro, the dollar dropped to a record low of $1.5904.

Since gold is a dollar-denominated commodity, any fall in value of the dollar will make it cheaper for other currency investors.

The dollar also hit record lows against the euro in the previous four days as investor confidence tumbled, sending US stocks lower for a third straight week and driving gold to an all-time high.

India Has Conducive Environment For Gold Mining

New Delhi: Stating that India has a conducive environment for the mine and mineral sector, the Minister of State for Mines, T. Subbarami Reddy, called upon the World Gold Council to invest in the gold mining sector.

“The consumption of gold is at an all-time high in India. The Government has taken a constructive approach to fuel growth in the mining sector and is looking to open investment in gold mining,” he said, adding that the WGC should ask entrepreneurs to bring in technology to promote investment in the sector.

Speaking at the meeting, James Burton, Chief Executive, WGC, said, “We hope the policies in the sector will be favourable for it to flourish in India.”

The price factor

On the fluctuating gold prices, he said the drop in the dollar rate is a major contributing factor besides the US sub-prime crisis. He, however, declined to comment on whether the prices will stabilise.

Burton also noted that the WGC is looking to cross-list its New York-listed StreetTRACKS Gold Shares, a gold exchange-traded fund (ETF), in Japan and Hong Kong by September.

Sanjiv Batra, Chairman of MMTC, said the potential of gold mining is very good in India. However, foreign companies in the sector were seeking clear guidelines regarding leasing agreements. He also said the Government is also looking at s

Gold Etfs Post 25% Return In 3 Months

Mumbai: After suffering huge losses on the bourses investors are looking for safer options such as gold ETFs to invest their money. Not surprising then, the gold ETFs listed on the NSE have outperformed the equity markets.

While the benchmark index, the Sensex has fallen 20 per cent in the last three months, gold ETFs have given returns of more than 25 per cent. Since December 10, 2007, the Benchmark Gold ETF has surged 28 per cent, UTI Gold ETF has risen 21 per cent, both Kotak and Reliance Gold ETFs have recorded a 27 per cent rise. Quantum Gold ETF has increased five per cent since its debut on the bourses on February 28.

“Investors are looking for more profitable avenues like the commodities market. The equity markets are rather choppy now; the real estate sector is not giving much return either. Also the bond and the fixed deposits are giving negative returns, so ultimately investors are putting their money into the commodities market,” said Shailendra Kumar, Head-Commodity Research, Sharekhan Ltd.

Analysts say that people are rather bullish on gold, due to which gold prices have been rallying for a while now. In the past three months alone, spot gold prices have increased 25 per cent.

Weak $ helps

“Gold is one of the beneficiaries of the weakening US dollar. And as the US markets are also tumbling we can see more money coming into the commodities markets. Even though the demand of these commodities may not be on the rise, investment in the ETFs has definitely seen an increase as people are becoming more aware of ETFs. Gold ETFs are fast becoming a popular alternative asset class to the equity markets,” according to Amar Singh, Head Research-Commodities, Angel Broking.

Investors do not see an immediate future in the equity markets due to which people are now shifting to alternatives such as gold ETFs, said N.S. Ramaswamy, Head Commodities, Ventura Securities.

Even though the ETFs are listed on the stock exchanges, they do not feel the pinch of the tanking markets as they are not benchmarked against the equity market index say marketmen.

“Gold ETFs are benchmarked against spot gold price, which are closely followed by the ETFs. That is why we are seeing an increase in the prices of the listed gold ETFs. Gold is a hedge against inflation and it helps in smoothening your portfolios,” said Devendra Nevgi, CEO, Quantum AMC.

Shailendra Kumar adds that another reason people turn to gold, as they do not fear of a big correction in gold prices unlike in the financial markets.

Gold Markets Likely To Witness Volatility

Chennai: Gold almost touched $1,000 an ounce last week but met with stiff resistance around the $996-level. The yellow metal slipped to around $965 towards the middle of last week before making some grounds to close at $974.20. Gold still seems to be supported by the weakening dollar and falling equity markets. It is one of the reasons why it is eyeing the $1,000-mark.

However, it faces stiff resistance at $993 and if it is able to get past that, then there should be stiff resistance again at the $998-1,000 range. Support for gold is seen around $980. What, in short, the market is likely to witness is volatility due to various factors. While key economic factors would be trying to drive it past the $1,000-mark, need for liquidity and profit booking could be the resisting factors.

To gold’s advantage, the sharp fall in the equity markets is likely to see investors queuing up for the precious metal. However, on the other hand, demand for physical gold, including in India, could be subdued due to the high prices. Most likely, investment and exchange-traded funds would be the ones that could show more interest in the yellow metal.

Not surprisingly then, last week the holdings of the exchange-traded funds was up by over two per cent.

According to brokerage firm Angel, the fundamentally weaker dollar and fear of more interest-rate cuts by US Fed should support gold’s allure. The outcome of the March 18 Fed meeting is keenly awaited by market participants.

In the medium term, supply and demand factors, dollar weakness, institutional buying, the price relationship between gold and crude oil (which is trading at record highs), and global economic uncertainty, are the key factors that will determine prices in the future.

The fed funds rate is now lower than the inflation rate, so there’s a negative real interest rate. In the longer run, investors could turn away from paper assets with declining value and turn toward assets with real value. This will provide a shot in the arm for gold.

Also, increased volatility in the world financial markets and a possible recession in the US economy could boost flight to quality buying in gold, according to Angel.

Silver, copper

Silver, which is following in the footsteps of gold, is seen finding support at $20.20, while resistance is at Friday’s PM fix of $20.80.

According to Angel, in the domestic market, MCX April gold support is at Rs 12,400 and resistance at Rs 12,830 per 10 gram. MCX May silver support is at Rs 25,200 and resistance at Rs 26,800 a kg.

The copper market should continue to find firm underlying support from steadily declining stockpiles in London warehouses. Another wave of copper deliveries from China could be ready to hit the market, as surging London prices spur exports from the world’s largest consumer of the metal, according to Angel.

Crude Oil

Market fundamentals, which have shown increases in crude inventories amid softening demand, do not justify the current price surge, and a sharp correction is likely.

Gold Price Poised To Top $1,000

Chennai: Gold continued its glittering run last week, gaining 3 per cent and towards the weekend, it was almost in a galloping mood. Helping gold were factors such as the four-month high inflation witnessed by the US, fall of the dollar and fears that inflation may rise further.

Overall, the yellow metal has gained 16 per cent since the beginning of this year and along with it, silver has also had a good run. It ended near $20-an-ounce mark during the weekend.

Impending crisis

Analysts are unanimous in their view that gold is gravitating towards $1,000 and it may happen this month.

What has happened with last week’s upward momentum is that gold has now found a firm support between $953 and $961, after having closed at $974.50 for April delivery.

It has been reiterated time and again that the US economy, the interest rate cuts announced by the Fed besides pumping of currencies were all pointers to an impending crisis and therefore, gold was firmly headed towards $1,000. And going by the panic that gripped the US stock markets, there should be no surprise if that event takes place this week.

According to Anuj Goel, analyst with Kotak Commodity Services Ltd, the yellow metal is headed for $1,025-1,030 range. His view is that raging crude and the euro-dollar equation could take gold to further highs. But there is a word of caution in that the dollar-yen has broken the crucial support of 104.

Back home, the waiver of farmers’ bank loans and raising of the income tax limit, which could see extra money in the hands of the households, are factors that can trigger demand for the yellow metal, besides, of course, white goods.

Gold appetite is never satiated in India, where the precious metal is valued the most. But the moot point is how many would have the courage to buy at prices of over Rs 12,500 for 10 gram. Still, with the marriage season ahead and a couple of festivals coming up, there could be some purchases.

With returns from gold being much higher than those from stock markets, that should see interest in its investment also. Therein, lies a reason for some more demand, not to forget the upcoming harvest season. The bottomline is that gold will continue to retain its sheen.

For those interested in technicals, gold will face resistance near $981 and then after $1,000. Supports for it are first at $954 and then at $939.

Silver will follow gold and it could also top $20 this week. Resistance is seen at $20.10, support at $19.33 after it closed at $19.875 during the weekend.

Crude, which has also had a run to a record $103 a barrel last week, could see some cool-off effect but March, analysts say, is always a time when it historically rises. Coal is likely to rule firm, while metals could witness profit-taking.

Gold Jewellery No More Indian Bride's Best Friend

Ahmedabad: When textile designer Anshu Murarka married earlier this month, her wedding trousseau had a laptop, a plasma television and mutual fund units besides seven gold coins, dainty gold chains, pendants and bracelets. Run-up to Budget 2008-09

Twenty seven years ago, says Anshu's mother Ramila, she had 500 grams of gold in the form of necklaces, ear rings, bangles and hair braids in her wedding dowry.

The unchallenged place of gold jewellery in Hindu weddings made India the world's largest consumer of the metal.

But soaring prices resulted in upstart gadgets replacing gold jewellery in the wedding dowry.

"If my daughter had to wear all gold (jewellery) at her wedding, I would have had to spend an additional Rs 2, 00,000 which was out of the question for now," Ramila Murarka said.

"About 20-30 years ago, a middle-class wedding trousseau had an average of 100 gram of gold. Now it has fallen to 70-80 gram," said Ajay Mitra, managing director-India of the industry-funded World Gold Council (WGC).

"Televisions, cars and cell phones have crept into a woman's marriage."

Gold prices have risen by 25 per cent on year curbing demand at a time when weddings are scheduled, and traditionally a boomtime for the trade.

On Monday, a bank quoted prices at Rs 12,421 per 10 gram, up from Rs 12,377 on Friday. The April gold contract on the Multi Commodity Exchange of India touched its highest level on Monday at Rs 12,186.

In January, when the season started, imports of gold totaled just 24 tonnes, down 72 per cent on the year, according to the figures of the WGC.

Fashions change, designs remain

While jewellery is losing appeal, it is not as if gold itself has lost any shine.

Rising incomes have ensured that the base of gold buyers is getting bigger, an analyst said. WGC figures show India's gold imports rose 7 per cent in 2007 to 773.6 tonnes.

Nineteen-year old bride, Vindhya Tiwari, also in Ahmedabad, said she did not want her parents to feel the financial burden of buying gold for her.

"So it is simple for me -- mix gold jewellery with fake (gold) jewellery," Tiwari said referring to her attire on her wedding day last week when she wore her mother's gold jewellery with newly acquired non-gold ones.

It's just that patterns of spending and new priorities have to be made room for.

Ritu Datta, an air-hostess also based in Ahmedabad, said she chose to buy a car with the money meant for her trousseau.

"I find it senseless to buy expensive gold ornaments and keep it in safe vaults when I can buy a car and use it everyday," Datta said.

These signs of more purchasing power help to sell more gold.

"With the reach of television increasing and the heavy promotions, gold has created a position in the minds of people," said Nayan Pansare, a gold market expert working for jewellery exporting companies.

"Many luxuries have become a necessity so brides may be buying less gold, but overall gold consumption may continue to increase due to Indians' fascination for the metal and more people being able to afford it now."

Gold Prices May Be On The Slide

The commodity bourses hogged the limelight last week with commodities setting records after records. Platinum traded at an all-time high and went above $2200, Palladium above $500 and Rhodium within a spitting distance of $9000. The agri commodities were not far behind either: wheat, soya and maize made exciting trading patterns. Of course, gold and silver, too, scaled fresh peaks. Gold went up all the way to $954 during the week while silver reached a fresh 27-year high by going beyond $18 threshold. Run-up to Budget 2008-09

Tuesday saw the beginning of the rally, and on that day itself the price went beyond $920 an ounce. Wednesday saw the price beginning from a vantage point at $928 in cash market, and thus did not have much difficulty to go beyond $940 mark. Thursday took the prices way beyond $950 level, all the way to $954.70, yet another record. The market cooled down a bit on Friday yet the price closed at a very healthy $944.60 an ounce, registering the best weekly gain in decades.

With the sustained weakness in US dollar, the push to the precision metals was automatic. The dollar fell to a three-week low against the euro on concerns that the Federal Reserve will cut borrowing costs to avert a recession. (The dollar has lost 11 per cent against the euro in the past year.)

The real push to gold, however, came from the astonishing rise in the crude price. Crude oil advanced to an all time high price of $101.32 a barrel in New York. The main driver to the oil prices came from the speculation that the OPEC, due to meet on March 5, is expected to cut output as winter heating demand wanes.

The across the board rise in commodities price during this week is clear indication that the investors are piling in their investible funds in the commodities sector, after having taken a heavy beating in stocks around the world. The most important news during the week in precious metals market was that China surpassed the US to become the world’s second-largest market for gold jewellery.

Coming to trading during the new week, the economic indicators due this week are existing home sales on Monday, producer price index and consumer confidence on Tuesday, new home sales on Wednesday, GDP numbers and jobless claims on Thursday. The prices are likely to stay volatile during the week, and there is a very strong case for decline in the gold prices this week.

According to statistics released by the World Gold Council (WGC) the sales of gold jewellery reached a record high of 302.2 tonnes, up by 34 per cent and second only to India.

The remarkable thing is that the consumption in China went up exactly in a year when it fell in the US, supposedly a price-inelastic buyer. In 2007, the demand for gold in the US saw a 14 per cent year-on-year drop. Even the gold market in Italy and Britain slumped, but the Red country sales were up. Another remarkable fact is that the Chinese buying has increased at a time when the gold prices are reaching the skies and smashing one record after another. China saw a 20 per cent year-on-year growth in gold jewellery sales in the last quarter of 2007 — the very period when the price of gold was going up remarkably.

The economic indicators due this week are existing home sales on Monday, producer price index and consumer confidence on Tuesday, new home sales on Wednesday, GDP numbers and jobless claims on Thursday.

The prices are likely to stay volatile during the week, and there is a very strong case for decline in the gold prices this week.

The market is top heavy and thus needs to be attempted with greatest caution.

Gold Softens On Reduced Buying, Weak Global Cues

New Delhi: After moving upward for the last four days, gold prices today receded marginally by Rs 5 to Rs 12,210 per 10 gram in the bullion market here on reduced offtake. Run-up to Budget 2008-09

However, silver continued to rise on increased industrial offtake along with strong overseas advices.

Marketmen said fresh resistance in demand due to record high levels and report of a weak trend in global markets mainly pulled down gold prices.

Gold declined by $2.24 to $943.86 an ounce in London. Prices were up 4.6 per cent this week, heading for the biggest weekly advance since November 23.

Standard gold and ornaments lacked necessary buying support and shed Rs 5 each at Rs 12,210 and Rs 12,060 per 10 grams respectively. However, sovereign, remained in demand and advanced further by Rs 100 at Rs 9800 per piece of eight gram.

On the other side, silver ready maintained its rising trend on increased offtake by industrial units and added another Rs 100 to Rs 22,100 per kg, while weekly-based delivery gained Rs 10 at Rs 22,850 per kg.

Silver coins remained steady at Rs 26,200 for buying and Rs 26,300 for selling of 100 coins in limited deals.