The Hindu Business Line : Gains for gold, crude on geo-political fears

Mumbai April 1 The gold market went through its characteristic gyrations last week, taking direction from the dollar and oil prices. Clearly, the market is facing resistance above $660/oz, despite rising crude prices and mounting geopolitical tensions. London PM fix on Friday was $ 661.75 an ounce, little changed from the previous day.

Implication

View among strategists is gaining ground that a high inflation print would keep risky assets under pressure in the near-term and should be negative for the dollar; and by implication, positive for the yellow metal.

Admittedly, gold fundamental balance has improved, with fabrication demand showing signs of stabilising. However, it is unlikely to be the main influence to drive the current price levels higher. Instead, the forecast for dollar weakness, firmer oil prices and geopolitical developments are likely to remain key upside risk drivers in the market over the next few weeks, according to experts.

Positive view

Meanwhile, in its annual report, AngloGold Ashanti said it continues to take a positive view of the market and its strategy of actively managing its hedge book, so as to reduce forward sale commitments and expose more of their production to a rising price will be maintained.

Technical analysts perceive $670 as the resistance level. While the market appears to be locked in a near-term $655-670 range, small divergence signals prevent a bullish outlook. A further consolidation into the new month can be expected, with a modest risk of a deeper pullback, a London-based chartist asserted.

Below $655 would imply a slide lower towards trendlines at $645 and $641.

Medium term bullish

However, looking at medium term bullish outlook, such a correction would provide an opportunity to buy. The greater bullish backdrop for precious metals in general and gold in particular is intact as first quarter this year has been positive across the board.

As we enter the seasonally strong second quarter, the market fundamentals look positive for the base metals complex. On Friday, following stronger-than-expected economic data for the US (personal income, consumer spending and new home construction), for the Euro zone (consumer sentiment, employment) and for Japan (industrial production), base metals rose across the complex.

On Friday, on LME (cash), copper recorded $ 6,916 a tonne, supported by a fall in stocks. Zinc posted a rise of 1.6 percent, on the back of third successive day of outflows from LME stocks.

Technical experts see 6920/6950 as a resistance zone for copper. The metal was inching towards 6,950 trendline resistance. Investors have to be wary of turning bullish until this level is convincingly overthrown.

Price action has been stuck in a downtrend since April 2006 and is testing the topside limits of its bear channel, an analyst pointed out. The bigger picture is positive. The trend is likely to be higher into next month above 6950/7000. The next target could be 7500.

Crude

As markets continued to show a high degree of nervousness in response to heightened geopolitical concerns, oil prices maintained their upward trend. Front-month WTI prices settled 3 per cent higher at $ 66.03 a barrel, its highest level since early September. The geopolitical environment is adding a further bullish layer to the current market tightness. Experts see no respite from firm prices anytime soon.

More Stories on : Commodity Markets | Gold & Silver | Petroleum

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

Stories in this Section
52 sugar cos offer 1,061 m litres of ethanol to oil firms

DoT may slap penalty on Hutch

Index funds - nothing beyond Sensex, Nifty

Oil India, IOC plan entity for overseas buys

Indian drugs find new markets

PFC seeks clarification from Lanco-Globeleq

States buying high-cost power to tide over summer crisis

Intel inside India in the sixties!

MFs, insurers fancy 91-day T-bills

Sentiment turns uneasy

Gains for gold, crude on geo-political fears

Public sector banks go for contract hiring