DOLLAR DRAGS DOWN GOLD

      - Mr. Prithviraj Kothari (MD, RSBL:RiddiSiddhi Bullions Ltd.)

Markets were less volatile towards the end of the week due to the closure of international markets on 4th July, as US celebrated it’s Independence day.

Gold dropped by around 0.6 per cent on Thursday but still remained strong over the week until Friday. The trend changed when, on Friday, the labour Department reported a stronger than expected  forecast . It stated 195000 rise in June non-farm payrolls, along with upward revisions for May and April.

The unemployment rate stayed at 7.6% however, rather than slipping as forecast. But average hourly earnings rose 2.2% annually against the 2.0% analysts predicted. 

Gold prices bounced and then dropped $20 per ounce to hit $1220 per ounce in London trade Friday, nearing their worst weekly finish since August 2010 after the release of June's US non-farm payrolls data.

With this improvement in the labour report, it gave more confirmation to traders that the Fed might scale back its quantitative easing program.

In fact it is believed that gold would have shown more movement and volatility had the markets remained operational on Thursday.

Many market players are on a four- day weekend after the International Holiday on fourth July. The markets are expected to show some pressure on gold on Monday as everyone will return from the long weekend holiday. I expect that rallies towards $1,300 and possibly $1,340 should continue to attract selling, till there are no stronger reasons for trend reversal.

Next week too, traders are surrounded by thoughts about when the Federal Reserve may curtail QE3. The other factors that will also matter are the ongoing conflict in Egypt and the exchange trade flow figures.

Now that the US economy has shown signs of growth and recovery and the US interest rates are rising, the dollar is now being reconsidered as a mode of investment. Gold works as a hedge against inflation. Now that inflation is declining, gold is gradually being replaced with other forms of investment.

In India too, the slag due the monsoon season and simultaneously curbs on imports of gold bullion has affected demand for gold and hence the promotion of diamond jewellery has been initiated much more forcefully.

Gold support is at $1,210 and $1,170. Resistance is at $1,262 and $1,273.

Silver support is at $18.70 and $18.40, resistance is at $19.50 and $19.90.

In the domestic market gold is expected to move in the range of Rs.25,000- Rs. 27,500 in the coming week.

"The primary purpose of this blog by Prithviraj Kothari - MD, RSBL(RiddiSiddhi Bullions Ltd.) is to educate the masses of the current happenings in the Bullion world."

- Previous Blog: "Good News Turns To Be Bad For Gold" : http://riddisiddhibullionsltd.blogspot.in/2013/06/good-news-turns-to-be-bad-for-gold.html