GOLD TO REACT TO FOMC

- By Mr. Prithviraj Kothari, MD, RSBL

 

Gold has been trying to find itself. It was at its peak in 2011-12, touching a lavish bull level of $1900. But in the last one year, gold prices have been falling, hovering around $1000 these days.

The ones who were bullish for gold are now speechless. Some supporters of gold have even lost faith in it. 

Though gold has been just above they key areas of $1150, there more downside risk for the yellow metals as the dollar continues to strengthen ahead of the Fed’s policy-setting committee meeting on March 17-18.

The dollar hit its highest in nearly 12 years on Friday and is widely expected to reach parity with the euro, due to the gap between U.S. and European interest rates.
Ahead of an expectation of an interest rate hike, a stronger dollar has been clouding over the positive outlook for gold.

A stronger than expected U.S Jobs report last week had raised expectations that the Fed would hike interest rates soon. Since then gold has taken a beating.

Gold was consecutively down since 8 days, falling more than 1 per cent on Wednesday. Gold has been strongly influenced by a robust dollar and expectations of higher U.S. interest rates.
The metal was headed for its sixth weekly loss in the past seven, down 1 percent so far and having hit its lowest in more than three months at $1,147.10 on Wednesday.

Following these negative sentiment, holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.28 percent on Thursday to 750.95 tonnes, the lowest since January. It had been three weeks since the fund saw any inflows.

Moreover, cutting the appetite for gold was last week's stronger than expected U.S. non-farm payrolls data that renewed expectations the Federal Reserve would begin to increase U.S. interest rates in mid-year.

A strengthening dollar makes dollar denominated assets like gold more expensive for holders of other currencies thus making gold unattractive.

After breaking a nine day lowering streak, gold prices managed to stay positively stable on Friday, Spot gold was up 0.1 percent at $1,154.35 an ounce during the day.

*Source-www.kitco.com

Analysts have noted that gold and silver have struggled all week as investor and traders piled in the U.S. dollar, driving it to a 12-year high. They add that the trend does not look like it will end soon.
The key event for financial markets next week will be the Federal Open Market Committee meeting, which will release its monetary policy statement Wednesday.

In the week, market player will be closely keeping a watch on the Federal Reserve as analysts are expecting gold to suffer on the back of a stronger U.S. dollar as the central bank prepares for an eventual rate hike.

However, the eventual rise in interest rates will cap any rally in gold next week.
Although the FOMC meeting will garner most of the market’s attention, other economic reports that could be market moving include regional manufacturing to be released Monday and Thursday as well as some housing data at the start of the week.

TRADE RANGE 

METAL	INTERNATIONAL	DOMESTIC
GOLD	1130$-1200$ an ounce	Rs.25,500- Rs.26,500 per 10gm
SILVER	15.23$- 17.00 $ an ounce	Rs.34,000- Rs.37,000 per kg

“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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