• Investment World
• eWorld
• Brand Line
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest
• The New Manager

Stocks

• Quotes
• SE Diary
• Scoreboard
• Open-End Mutual Fund

Cross Currency

• Rates
  
  

Shipping

• Ports
  
  

Archives

• Yesterday
• Datewise
• Resources
• In Focus
• In Depth

Group Sites

• The Hindu
• The Hindu ePaper
• Business Line
• Business Line ePaper
• Sportstar
• Frontline
• The Hindu eBooks
• The Hindu Images

G. Chandrashekhar

Non-fundamental factors likely to be crucial determinants

Mumbai April 8 Gold price prospects continue to remain intact. After rising strongly on Wednesday driven mainly by sustained high oil prices (moments before the Iranian announcement of the release of Royal Navy personnel), prices softened modestly; but still retained much of the gains, supported by a weaker dollar, closing at a five-week high. On Thursday, London PM fix was $673.50 an ounce.

GFMS survey

For the long-term, there is reason to be bullish on gold and silver. GFMS Gold Survey confirmed the view of a strong upside for the market. Gold fundamentals may not exactly be turning positive (rising mine output and stabilising fabrication demand), but are surely turning less negative. Sales by European Central Bank totalled 72 tonnes in the first quarter versus 70 tonnes during the same period a year ago.

Non-fundamental factors are likely to be crucial price determinants.

Gold price

Forecasts of further dollar weakness, stronger oil prices and continued geo-political tensions combined with improving fundamentals would help drive positive market sentiment. Technical analysts too are upbeat about gold price prospects.

Topside levels to note are $677 and then the late February peak near $688. Until this latter level goes, the risk is still higher but only within a range, asserted a London-based chartist.

In the medium term, there are still higher highs to come. Choppy ranges will give way to the topside in the months ahead. If gold crosses $695, it would target even 850.

There is also optimism on silver. Short-term, silver is trying to build on recent gains after the strong first quarter decline. The November and February peaks at $14.20 and $14.75 respectively remain the chart targets to note for April. The low near $13 remains short-term support.

Base metals: Ahead of the 4-day Easter holiday in the western world, nickel, copper and zinc all made strong moves to the upside last week, with nickel up by over 11 per cent, zinc by nearly 6 per cent and copper by about 7 per cent. Aluminium was the laggard, up by less than 2 per cent on the week.

Spot well-supplied

Last Wednesday, copper prices firmed further to close at their loftiest level in 2007 so far, at $7,420 a tonne (LME 3 month.); but slipped by $80 the following day. In the near-term, the spot market is well supplied. At Shanghai Futures Exchange copper stocks are high and China's copper cathode imports registered an all time high in February. The downtrend in LME copper stocks is supportive.

Lead prices also strengthened to set another fresh all time high at $2,020/t in early trade on Thursday.

Market fundamentals continue to underpin the strength in prices with strong demand, recent supply disruptions and low LME inventories.

Nickel stocks

After a small drawdown in January, nickel has seen little change in stocks in February and March.

However, this has not prevented prices going from strength to strength - hitting new highs last week. On Thursday, the metal closed at $52,150/t LME cash.

Although analysts see signs of weakness developing in European nickel demand, the critical issue for prices is whether this will be enough to actually tip the market into surplus. Until physical availability starts to ease, prices are not going to ease.

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

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

Stories in this Section
Inflation fighting — RBI's `Shock and Awe' treatment

Copyright © 2007, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line