-By Mr. Prithviraj Kothari, MD, RSBL (RiddiSiddhi Bullions Ltd.)
Gold prices rallied above $1,430 an ounce to 3-1/2 month highs on Wednesday as rising tensions over Syria sparked safe-haven demand and a scramble among investors to cut their bets on falling prices
The
metal hit a peak of $1,433.31 an ounce, its highest since May 14, as the United
States and its allies geared up for a probable military strike against Syria in
response to an apparent gas attack that killed hundreds of civilians in a
rebel-held suburbs of Damascus.
Gold
was on track for a 5.40 percent gain on the month and its second straight
monthly increase. It briefly trimmed its decline in the afternoon as U.S.
Secretary of State John Kerry made a case for a "limited" strike
against Syria, but prices fell back to pre-speech levels before he finished his
televised address.
Till
then, gold was dancing to the moves of the data released by US. Gold fell on
Thursday, snapping a five-day rally as a U.S.-led military strike on Syria
appeared not to be imminent and investors turned their attention to strong U.S.
economic growth and the Federal Reserve's plans to rein in its stimulus
program.
Gold
prices in the international market declined as US economy grew by 2.5 percent
annualized rate in Q2 up from previous quarters' 1.7%. Economists widely
expected the GDP to grow by 2.2% and the trumping of expectations along with
the dip in initial jobless claims by 6000 last week ensured a dip in gold
futures. Gold slid below
$1,400 an ounce on Friday as the dollar rallied to a four-week high, with
investors squaring positions at the end of the month and cashing in on a recent
run-up ahead of a long U.S. holiday weekend
I feel the correction in Gold prices came mostly from month-end position squaring and profit-taking after prices on Wednesday reached their highest levels since mid-May. I pray for all the souls who have lost their lives in Syria and may peace usher in the nation.
Meanwhile, In South Africa there was an atmosphere of unrest. The National Union of Mineworkers (NUM) has given 48 hours’ notice of a strike at South Africa’s gold producers, the country’s Chamber of Mines said on Friday.
The Chamber, which collectively bargains on behalf of South African gold miners AngloGold Ashanti, Gold Fields, Rand Uranium, Harmony Gold, Evander Gold Mine, Sibanye Gold and Village Main Reef, expects the strike to take effect from the night shift on September 3.
This too will affect gold prices.
While in the domestic market, the Indian rupee slipped for third consecutive day in a row on Wednesday to close at a fresh record low of 68.80 per dollar, as uncertainty over a possible US-led military strike against Syria knocked down Asian equity markets and currencies. This is the biggest ever single-day fall for the currency since 1995.
Apart from global factor, India suffers higher current account deficit fuelling worries that foreign investors will continue to sell out of a country facing stiff economic challenges.
The currency has plunged over 13 per cent so far in the month of August alone to mark its worst monthly fall since the year 1993.
Rupee has plunged nearly 25 per cent so far in the year 2013. A plunging rupee has affected bullion prices too taking gold to a life time high of in the Indian markets.
Risk of supply disruptions for platinum remains at large, I feel the sustainability of a price rally above $1,500 is likely to reduce as the jewellery demand will fade above $1,500. China is the dominant player in the platinum jewellery market, accounting for nearly 60% of the world platinum jewellery demand.
With respect to Silver’s rally over the past few weeks, I believe the metal’s underlying fundamentals remain weak. I feel short covering was the major support that leads the metal prices to reach higher levels. I do believe for the time being the metal will also find support on dips (taking its lead from gold).
The trade range for gold for the coming week is expected to be $1375-$1423 an ounce in the international markets, and in the domestic market it is expected to range between Rs.30,000- Rs.33,500 per 10 gram
“The primary purpose of this blog by Prithviraj Kothari - MD, RSBL, is to educate the masses of the current happenings in the Bullion world.”
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