The Hindu Business Line : Current situation doesn't bode well for gold

Gold sentiment continues to be weak. Prices dipped below $620 an ounce during the latter part of last week before bouncing back to $632/oz (London PM fix) and $637/oz in New York on Friday. Weak dollar, high crude market and lower-than-anticipated job data were cited as the reason for the recovery.

Temporary

The current weakness, seen largely as temporary, is evident from the market' s failure to respond to recent positive news flows.

An advisor to the People's Bank of China recommended diversifying into gold; GFMS data suggested acceleration of de-hedging in the first quarter; there were inflows of 7.4 tonnes into the StreetTRACKS ETF (Exchange Traded Fund) last three trading days; and there was a slight recovery in EUR/USD.

There is reason to believe, the price strength over the past few months was based largely on sentiment and momentum. In such a case, the current situation does not bode well for the gold market. It is looking weak on technical basis too.

A London-based technical analyst asserted that until a clear trend-ending signal (recovery above $665-670 an ounce) is seen, one must remain wary of further downside (pointing to $ 610-600).

Other developments

Meanwhile, other developments have come to the fore. According to reports, concerns about Iranian nuclear standoff have eased somewhat. Latest GFMS data showed gold de-hedging in Q1 surged almost six-fold year-on-year to 4.6 million ounces (142 tonnes) representing the highest level since Q4 2002.

In India, southwest monsoon commenced a week ahead of the normal date.

Satisfactory precipitation over next four months will mean improved farm output, rise in rural incomes and resultant rise in gold demand. At the current high prices above Rs 10,000 per 10 grams there surely is some consumer resistance.

At the same time, the recent fall in price has created a buying opportunity for investors and speculators. Given that global economic and political conditions continue to be supportive of gold, most experts agree the price has an upside potential in the months ahead, although in the short term the market could be volatile.

More Stories on : Commodity Markets | Gold & Silver

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Monsoon weakens

BSNL wants immediate payment from MTNL

Waiting to bloom

Plan for direct fertiliser subsidy to farmers dropped

Investors waiting for index levels to rise for redemption?

Animal health players make hay as drug cos exit segment

Market may see an end to downtrend

Current situation doesn't bode well for gold

New I-T returns form — Not Saral anymore!

IBM chief Palmisano coming