by Mr. Prithviraj Kothari, MD, RSBL
Gold has established a support level at $1275 since March and prices have risen post this level.
But, during the second half of March gold fell heavily from resistance around $1400 back down to a several week low near support at $1275.
As 2014 began, gold moved very well for the initial months towards a six month high near $1400 and has now plunged to levels closer to $1300.
As news of the escalating tensions in Middle East and Ukraine gained momentum, gold gained 5.4 per cent year due to rise in demand for this safe haven asset.
After hovering at around $1290 gold has plunged sharply over the last week and has broken through the support at $1275.
It rallied a day ago however ran into further resistance at $1275 before falling lower to a four month low around $1258.
Though gold has always been the markets favourite metal during uncertainties, but this time bullion investors continue to worry over strong U.S. economic data and its impact on the dollar.
This week we saw gold falling to its lowest level in three months, on Friday before it recovered modestly.
On Tuesday, Gold witnessed its greatest drop this week as the market broke through recent support at the $1,270 area.
Gold was unable to capitalize on the news of the ECB’s interest rate cut and QE program as the euro weakness offset any support gold would have received from the new liquidity programs.
AS tensions lingered over Ukraine and a weak dollar forced bargain hunting, we saw gold prices rising on Wednesday after prices earlier fell to a two and a half month low.
The yellow metal was under pressure after the Russian President drew plans for a ceasefire but then regained its prices when the Ukraine prime minister later dismissed Russia's proposal.
The metal is under pressure as the euro languished near a 14-month low versus the dollar on Friday, struggling to regain its footing after the European Central Bank delivered a fresh round of stimulus and promised even more if needed.
Gold was standing firm above the $1270 level in Thursday as it was impacted by a weaker Euro and surging equities after the European Central Bank cut interest rates to record lows which was counteracted by lower than expected U.S. jobs data.
The main refinancing rate was cut to 0.05 per cent from 0,,15 per cent and the ECB lowered the rate on bank overnight deposits to -0.20 percent.
But what surprised the market was Fridays U.S. jobs data that gave gold a push thus helping it to return to modest levels overnight.
The U.S. Labor Department said the economy created 142,000 jobs in August, far below expectations for a figure of over 200,000. The unemployment rate fell to 6.1%, a six-year low. The average pace of job creation this year is 215,000, up from 194,000 in 2014.
Gold rose from an 11-week low, after U.S. employers added the fewest jobs this year, adding some pressure on the Federal Reserve to maintain lower interest rates.
Initially data reports had stated the US economy was back on the path of recovery but Fridays number were a bit disappointing .
A stronger greenback is a setback for dollar denominated gold as it makes the yellow metal more expensive for users of other currencies.
Gold traders are likely to keep an eye on currency moves next week after the euro fell to a 14-month low versus the dollar Thursday, following the surprising move by the European Central Bank to cut interest rates and embark on a quantitative easing program.
Traders will also extend a warm welcome to the month of September as it has historically been the best performing month for gold giving an average return of 2.16 per cent since 1969.
A spike in retail demand in India is another reason for the typical bump.
We hope this month the be a booster for gold.
The primary purpose of this article by Mr. Prithviraj Kothari is to educate the masses of the current happenings in the Bullion world.
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"Bull v/s Bear"
http://riddisiddhibullionsltd.blogspot.in/2014/08/bull-vs-bear.html
