The Hindu Business Line : Risk growing for a slight downtick in gold

Mumbai March 11 After days of oscillation gold failed to decisively break through barriers last week. Resistance at higher levels - $655-658/oz - was strong, although softer dollar and firmer oil prices helped turn the sentiment at some stage.

Neutral data

The US non-farm payroll data, it is widely believed, would largely be neutral for gold. On Friday, the London PM fix was $652.25 an ounce, $2 lower from the previous day.

Interestingly, the platinum group metals gathered upward momentum with platinum and palladium both rising following a Johnson Matthey report that China was in the early stages of drafting legislation to reduce vehicle emissions. Hybrid vehicles and fuel cell vehicles would need to use platinum and palladium and China has large demand for vehicles.

On Friday, in the London market, platinum closed at $1,203 and palladium at $352.

Another run

As for gold, according to technical analysts, investors should look for further near-term oscillation, and the risk is growing for a slight downtick in the early part of the new week before the market takes another run toward and through $660.

In the medium-term there are still higher highs to come for gold.

Choppy range may give way to the topside in the months ahead. Support to the downside remains at $647-645. Silver moved in tandem with gold. The London AM fix on Friday was $13.07/oz ($13.09 previous day). Chartists see an end to the downside and a potential upside move into the new week.

Market tightening

As far as crude is concerned, the broad picture remains constructive.

The US and global data suggest strong oil market tightening in progress, while demand remains robust. There is likelihood of the market moving up to $65 a barrel before too long, according to experts. Driven by soft US construction and manufacturing payrolls data for February, base metals fell on Friday.

Lead and zinc suffered the biggest falls, down by 3.8 per cent 3.3 per cent respectively.

Small upside

Despite the US payroll showing a slightly better-than-expected rise in jobs added in February of 97,000, and January and December job growth revised up by a total of 55,000, jobs fell in the metal-intensive construction and manufacturing sectors by 62,000 and 14,000 respectively, in February, analysts pointed out.

Base metals generally could remain directionless for some time, although aluminium and zinc are seen having a small upside from current levels.

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