The Hindu Business Line : Gold prices collapse on profit taking

Losing lustre
The metal was down nearly Rs 220, trading at about Rs 11,690 per 10 gram on the bourses.
Some analysts have ruled out the possibility of the metal returning to four-digit prices anytime soon; and surely not $ 1,200/oz as forecast until recently.

G. Chandrashekhar

Mumbai, April 1 Gold prices are seen collapsing, for the second day running. In the London market, around noon today, the yellow metal moved below the psychological $900 an ounce to trade at around $895/oz. Silver breached $17/oz.

Fears over recession and decline of the broader financial markets that created liquidity crunch pushed investors into exiting long positions.

The latest CFTC data reveal a mixed sentiment towards the entire precious metals complex.

Exposure towards gold and silver is being scaled back.

According to analysts, during week ended March 25, net fund length in Comex silver declined heavily (down 18 per cent week-on-week).

Net fund length in gold declined by 16,300 lots primarily on the back of long liquidation, even as prices dropped by over $40 during the period.

Interestingly, despite profit taking, overall speculative positions in Comex gold still remain large. They are only 36,000 lots away from record highs reached earlier in the year. This creates a downside risk.

The domestic market continues to reflect global trends. The metal was down, trading at about Rs 11,690 per 10 gm on the bourses. Investors are rushing to sell off. There has no doubt been strong consumer resistance at higher price levels. The question from now onwards is whether investors will return to the market. Gold, it is widely believed, still has some downside left. There is the possibility of prices first touching $880/oz, and possibly move towards $850/oz.

external factors

However, external factors such as inflationary concerns and broader economic concerns, geopolitical tensions and Fed rate easing are likely to stay in the background to prop the market. Some analysts have ruled out the possibility of the metal returning to four-digit prices anytime soon; and surely not $1,200/oz as forecast until recently. As greed pushed the market up, fear seems to be ruling the roost now.

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