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

GOOD NEWS TURNS TO BE BAD FOR GOLD

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

                  As we said, the "bull" in the Bullion seems to be fading away.

Gold seems to be losing its glitter as it's no longer appealing to the common investor.

Gold has dropped almost $200 an ounce in the past 10 days.

Gold reached $1179- it’s lowest since 2010. In fact gold is headed for a 24 per cent drop for the second quarter. This is considered to be the biggest quarterly drop for gold since 1968.

All this was triggered due to short selling and good economic data coming in from the US. However, Gold has declined sharply since Fed Chairman Ben Bernanke said last week the U.S. central bank plans to start scaling back its $85 billion monthly bond purchases in the next few months if the U.S. economy grows more quickly than anticipated and the jobless rate falls rapidly. That would tend to drive up interest rates, making gold less attractive as a safe haven for funds in a low-rate environment. 

One of the prime reasons suspected was the panic selling, as everyone tried to exit as they were in deep fear as to how low can gold go.

However, Friday was welcomed on a different trading note for gold. Though it dropped during the day, later in the evening it bounced back. The main reason for this was that Friday witnessed a daily close, a weekly close, a monthly close and a quarterly close for gold contracts. This resulted in short covering. Also 1180-1155 was seen as a good bottom for gold to bounce back. It turned back from 1179 and crossed 1200 thus reaching 1228 by 11 pm (IST).

A record breaking event that we saw in the past week was the depreciation of the rupee in the Indian market. Rupee was valued at its life time low of 61.15 against the dollar. If this depreciation would not have occurred then gold would have been somewhere around 22,000 keeping in mind the drop in gold prices in the international markets. But a weak rupee curtailed the prices thus creating a support for gold at 24,800. 

Platinum remained under pressure, although it finds good support around the $1,320. I feel platinum might appear a more promising prospect, given their relatively better looking fundamentals, mostly on the supply-side due to concerns over strike activity in South Africa. However, these fears may have been somewhat reduced by the civil and reasonable wage settlement at Aquarius earlier this week—the first platinum miner to settle in South Africa’s 2013 wage negotiation season. However, whether this negotiation and settlement sets a precedent for the rest of the sector remains to be seen, especially since these negotiations were not marred by NUM-AMCU rivalry, as might be the case at other miners.

Gold support is at $1,205 and $1,170. Resistance is at $1,265 and $1,300. Silver support is at $18.18 and $17.70, resistance is at $19.42 and $20.16.

In the domestic market, gold is expected to move in the range of INR 25,500 on the lower side and 27,500 on the upper side

"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: 

"Has The Bull Period For Gold Ended?" : http://riddisiddhibullionsltd.blogspot.in/2013/06/has-bull-period-for-gold-ended.html