GOLD LOSES ITS GLITTER

Gold and silver did not show much volatility from 2nd to 7th July. Post the Wednesday close (4^th July), gold and silver tumbled down, Reasons cited for this were the ECB rate reduction from 1% to 0.75% which in turn affected the Euro, oil and precious metals.

Moreover, the U.S payroll report stated that only 80K jobs were added which means that though there was a development, it was at a slower pace.

This week’s movement relied on the minutes of the FOMC Meeting, China's GDP for the second quarter, Euro Council Meeting and the U.S trade balance.

Gold and silver moved in different directions for the second straight day but both metals did not do much during the week. On a monthly scale both precious metals slightly declined

It was a mild “risk-off” trading day in the market place on Thursday. Wednesday afternoon’s FOMC minutes from the Federal Reserve that confirmed a sluggish U.S. economy was responsible for this, but provided no fresh clues on any upcoming Fed monetary-policy-easing moves. Most market bulls wanted the Fed to signal it’s embarking on another round of quantitative easing, better known as QE3.

Fears of weakening world economies exhibited modest risk aversion in the markets which in turn led to a moderate downfall in gold futures on Thursday.

Like other commodity markets, gold declined and proved to be a risk asset rather than a safe haven asset.

Spot Gold was last quoted at $ 1,567.50 on Thursday.

However, Friday had somethething else in basket for gold .Risk taking in the marketplace following the release of the Chinese GDP figure on Friday, resulted in the price of gold gaining close to $20 an ounce for the day. Investor confidence in the global economic recovery was boosted following the Chinese news, which came in close to its expected level. The precious metal ended up finishing the week at $1589.26.

This week, analysts are warning that gold may not be able to extend Friday's gains. While the Chinese GDP figure was viewed as positive by many investors, it still did not signal any expansion in the global economy. Given the current state of the euro-zone, as well as fears that the region's debt crisis could spread further, gold may reverse some of its gains in the coming day

In India, onset of the monsoon plays an important role in the economic growth. The gold market too, will be paying attention to the outcome of India’s monsoon season.

Good monsoon season is positively correlated with agricultural crop yields, in turn farmers’ incomes and higher gold demand. Rural farming areas account for approximately 60% of Indian gold buying. However, So far, the monsoon season is not off to a good start, with rainfall to July 10 reported by be 23% below average, although sowing levels, which are also important factors for agricultural yields, are pretty much in line with last year. The India Meteorological Department has said that the monsoon is likely to pick up in July and August, forecasting 98% and 96% of respective monthly averages. So for gold, while the initial indicators aren't so good, there's still time for some optimism to grow.

USD REPLACING GOLD AS CURRENCY OF LAST RESORT

Gold and silver started off the week with little movement but coming Tuesday they both bounced back. The rally in bullion was inline with the rise in other commodities rates and U.S stock markets. Since the U.S markets were closed on Wednesday there was not much movement in the commodities markets. 
SPOT MARKET gold prices traded close to $1610 an ounce for most of Tuesday morning in London, after breaking through the $1600 mark during the earlier Asian session. Silver prices touched $28 an ounce for the first time in nearly two weeks, while stocks and commodities also gained after disappointing US manufacturing data led to renewed speculation that the Federal Reserve might launch a third round of quantitative easing, known as QE3. 

However, precious metals saw a decline post The Wednesday close.

Gold and silver prices declined following the ECB decision to cut interest rate by 0.25pp to 0.75% and deposit rates from 0.25% to zero. This news also adversely affected the Euro/USD. Moreover the growth in the US economy was seen at a much slower pace
Comex gold futures prices ended the U.S. day session modestly lower on Thursday in choppy trading. The sharply higher U.S. dollar index pressured the precious metals as did traders being in a bit of a “risk-off” mentality. Dollar`s rally of more than 1 percent on Thursday`s session, the biggest daily rise in nearly eight months. Unemployment claims reduced to 374K as compared to a forecast of 385K which showed positive signs in US job market though the Unemployment rate remained unchanged at 8.2%.
The wave of monetary decisions announced by major central banks sparked Fears in markets regarding the outlook for the global economy, which in turn triggered a sell-off in commodities and shares as investors resorted to safe haven assets, especially the U.S. dollar and yen.
In the physical market, demand is still lagging on lackluster buying from Asian countries. Bullion rates might continue to zigzag from gains to losses and basically move in the same direction as the major currencies pairs including Euro/USD.  


A stronger dollar can hurt demand for metals and other commodities by making them more expensive in other currencies.  Further, a stronger dollar detracts from buying of gold as a sort of alternative currency, and vice-versa.