RSBL Gold Silver Bars/Coins

Tuesday, 13 December 2011

Is this the upside point?

Indians are usually the biggest buyers of gold in the world and from October to December, the calendar is full of festivals and weddings, creating many opportunities for people to flaunt their finery.

But international prices of spot gold have risen 21 percent on the year, their 11th straight year of rises, and a weakening rupee is also increasing domestic prices.
Gold prices rallied for the fourth consecutive day by adding Rs.220 to Rs. 29440 per 10 grams in the bullion market on Wednesday due to seasonal demand amid a firming global trend.

Traders said there was a buying trend seen in the commodities market as the weakening equity and Forex markets left no other option for investors, but to park their funds in bullions.

On the domestic front, gold of 99.9 and 99.5 per cent purity added Rs. 220 each to Rs. 29440 and Rs. 29300 per 10 grams respectively. The metal has gained Rs. 300 in the last three sessions

Gold prices showcased a strong performance on Thursday and surged by around two percent as investors’ risk appetite improved and they piled up positions across risky asset classes like commodities. Sentiments turned buoyant after the consortium of world’s top central banks’ acted in concert by joining forces to lend dollars more cheaply to foreign banks. Apart from the central bank’s act, the sharp decline in US dollar against a basket of currencies and the unexpectedly strong US payrolls data coupled with the encouraging US home sales data, underpinned yellow metal prices

Gold is considered a safe haven asset demand for which increases during times of uncertainty. However gold has shown positive correlation with commodities in general in last few weeks. While this positive correlation may persist in the near term, gold will eventually resume being a safe haven asset.

Gold rose sharply on Wednesday amid a rally across equity and commodity markets and amid a sharp drop in US dollar. Rise in ETF holdings also lent support to gold prices
The rally in equity markets reduced safe haven demand for the US dollar lending further support to gold prices. The US dollar index trades little changed today after a 0.9% slide on Wednesday. Weakness in US dollar made dollar denominated commodities cheaper for traders using other currencies

As gold remains in a conundrum of being a safe haven asset or a commodity in general, supportive factors persist for gold in form of Euro-zone debt crisis, loose monetary policy and intervention in currency markets. After ECB’s surprise interest rate cut, China cut in reserve requirement rate indicates a shift in policy stance. Gold may note some gains tracking cues from international exchange however upside is limited.


  1. sir,your current view for the gold &silver for the month of january.

    1. Hello Mr. Ranka,
      Thanks for your interest. I have answered your query in the post "The BULL in the Bullions". Is there anything specific that you are looking out for?