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M.R. Subramani

New Delhi, April 13 Gold was led by movements in crude oil last week and it ended a tad lower compared with the previous week.

As crude oil prices tend to rise, the dollar is seen taking a hit and gold, whose fortunes are tied to the fall in the US currency, gains.

In fact, a decision by the European Central Bank to leave the interest rates unchanged at four per cent, saw the dollar drop to a new low of 1.5877 against the euro.

Hopes that the interest rates spread, between the euro and the dollar, are expected to widen is seen to impact the greenback in the near term. This, in turn, will lead investors to look for alternative assets, particularly commodities such as gold. A look at the open interests in gold reveals that large speculators hold 48 per cent of the long positions, while commercial hedgers hold 78 per cent of the short positions.

What actually has happened is that large speculators have vacated their long positions since the open interest hit a record of over 5.93 lakh on January 15. On April 1, the open interest slid to around three lakhs.

Gold looks negative in the short-term and could head for its one-month low as speculators are expected to wind up their open positions.

The number of long speculators, in particular, has declined during the last couple of weeks. Speculators are likely to wriggle out of gold in the short-term, as they are tending to lose money.

However, potential still exists for a large rise in gold in the longer term, particularly if the dollar continues to weaken.

The yellow metal could even top $1,000 or even touch $1,500 or $2,000 and more if it resumes its uptrend.

Similar circumstances saw gold and silver more than treble during 1979-80, says the Web site technicalindicators.com.

Both the times, crude gained and the dollar declined, though interest rates then were higher. On the other hand, the fundamentals are not supporting an upside to gold as physical demand is witnessing a decline in view of higher prices.

According to Angel Broking, gold will take cues from the US economic outlook and expectation of future interest cuts by the US Federal Reserve.

Standard Bank sees short-term correction despite a strong upside potential in the medium-term.

It sees support for gold at $916 and fall below that could see another support propping up at $911 and below that at $894. Angel, on the other hand, sees support for MCX gold June contract at Rs 11,725/11,480 for 10 gm.

Resistance for an upside in gold is seen at $935 and beyond that at $945 by Standard Bank.

Angel pegs the resistance for MCX June gold at Rs 12,178/12,383. Silver, which closed at $18.01, is seen toeing gold’s course. It could derive support at $17.67 and below that at $16.89, according to Standard Bank.

Angel sees strong support for MCX May silver at Rs 22,500 and Rs 21,860 below that, while resistance is seen at Rs 23,800 and Rs 24,500 a kg beyond that. The upside in other precious metals such as platinum and palladium are seen well supported.

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