The Hindu Business Line : Gold may trade sideways in the short term

Gold could largely be trading sideways in the days ahead, given the global state of play. Last week ended with the metal failing to breach the psychological mark of $600 an ounce, despite a firming crude market, slightly weaker dollar and follow through buying.

Geopolitical Tensions

Yet, there was some profit taking too that neutralised the impact.

Geopolitical tensions have considerably eased; yet, incipient signs of resurgence have emerged from Iran recently. With the Fed leaving interest rates untouched, growth versus inflation dilemma could resurface. The US dollar has held on steadily, but how long it can is a big question.

Physical demand, on the other hand, is good; but not strong enough to propel the metal higher.

Investors have turned somewhat cautious because the market seems to have been trapped in a range of $580-$620.

Comex Gold

CFTC data revealed that non-commercials have cut their exposure to Comex gold market.

What will provide the trigger for a break away from the range is unclear as yet. According to technical analysts, in the short-run, charts show choppy conditions ahead. There are multiple overhead resistance levels, starting with $605-607.

"Failure to take out the trendline (currently $600) earlier in October adds to the evidence that choppy conditions between $554 and $ 607 are likely to stay in place into the next month," asserted a London-based expert.

A move below $573 will of course damage the upside potential. However, there is general expectation that the dollar will begin to weaken towards the end of the year, something that should prove positive for gold.

Choppy ranges will give way to the topside later this year, or even into next year, with a likely pick up in volatility.

Base Metals

Base metals have performed exceptionally since the beginning of the year.

Despite 15-20 per cent losses in June (after hitting multi-year peaks in May) due to sell-off triggering concerns over end to the bull run, prices have recovered handsomely.

In recent weeks, nickel, zinc, lead and tin have performed rather well. Indeed, copper and aluminium have been laggards since May. However, with tightening market conditions, resurgence of Chinese demand and low inventory levels, the copper market is set to move higher. In the short-term, copper, nickel and zinc are the candidates to watch.

Prices favour the three metals. LME cash basis, copper could touch $8,100 a tonne, while nickel may rise to a new peak of $35,000/tonne. Zinc has a 5 per cent upside to touch $4,200/tonne.

More Stories on : Gold & Silver | Metals

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

Stories in this Section
Rain belt moves north, may linger

Proposal to set up arecanut board

Ethanol supply: Oil cos to start price talks this week

Note on lifting of sugar export ban to be ready soon

Shadi Lal to acquire Monnet Sugar's mill

Comex gold may rise

Palm oil may fall, then rise

Gold may trade sideways in the short term

Pepper futures: Favourable scenario for the buyers

`Land acquisition for SEZs not to affect farmers'

Little progress on Doha Round