The Hindu Business Line : Gold prices may remain choppy

The precious metals market was in a buoyant mood last week. Gold prices traded to a fresh one-month high towards the end of last week. The market took its cue from the Euro/USD on reaching record highs. Obviously, the dollar will continue to set the tone for the market in the coming days.

However, the metal has a long way to go before it reaches anywhere near its price potential anticipated at the beginning of this year.

So far, gold has repeatedly failed to breach the psychological $700 an ounce barrier. In the second half, supplies are likely to bounce back. The Central bank sales are unlikely to be lower, while producer de-hedging will slow. There is some uncertainty over how jewellery demand will unfold. All these would suggest that the market needs a strong trigger to break out of its current trap.

Corrections

Of course, dollar weakness, strong crude market and geopolitical concerns all continue to operate as key determinants. Surprisingly, despite Euro/USD reaching record highs, the response of the yellow metal has been rather muted. Therefore, market participants have begun to wonder about the extent to which the currency will continue to impact prices. There is suggestion that the gold market will remain vulnerable to corrections for sometime, although a further upside cannot be ruled out. The real challenge is to overcome the $693 resistance level.

Quite clearly, a new catalyst is required. Technical analysts believe the market is poised higher and may test 675/677.

Price Robustness

The gold market will remain choppy.

It may be advisable to buy on dips, although there is some uncertainty over the robustness of price performance in weeks ahead.

Base metals: The copper market continues to operate under uncertain conditions. There is price strength, driven mainly by a multitude of ongoing strikes and steadily falling LME stocks. Stocks in Shanghai exchange are rising though.

However, concerns over domestic oversupply in the Chinese market persist. Obviously supply disruption potential is keeping the market from falling.

Caution is necessary in trading this metal as the market could turn volatile. Technically, the odds for a correction increase. The commodity has repeatedly failed to breach the 8040 resistance (78 per cent of May 2007 fall). This warns of a near-term corrective activity, assert chartists. However, with July historically positive for copper, near-term weakness remains counter-trend and temporary.

The near-term weakness could be limited to the band of strong support between 7695 and 7480.

Support

Closes below 7480 are needed to indicate a more neutral near-term outlook.

The medium-term looks clearly bullish, and prices would not only surpass the psychological 8000, but also reach the 2006 peak of 8800, technical analysts assert.

More Stories on : Gold & Silver | Outlook

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

Stories in this Section
Centre raises wheat output estimate to 74.89 mt

BSNL factories may make hi-tech equipment

Unified face of Air India on show from Aug 1

Asean FTA: Lower tariffs worry auto industry

Cement plants unable to meet demand despite operating to full capacity

Wide differences in returns from leaders and laggards

Anil Ambani group co says Reliance’s KG gas is its source

MS thinking of ‘shared PC’

Gold prices may remain choppy

Foreign exchange inflows, weak credit offtake trigger rally in bonds

Global cues may decide direction

Amendments to SBI Act — A sorely missed opportunity for pushing reforms

Container train players want level field