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Mohammed Yousuf

Last week, the festival of Akshaya Tritiya was celebrated. During the last two years, this festival had seen large scale buying of gold. However, this year it was a different experience. —

M.R. Subramani

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Chennai, May 11 Gold made some improvement last week, rising to $885 by the weekend. Maybe, prices of the yellow metal improved but things are yet to turn around.

In the last two months, since it hit a record $1,034 an ounce, gold has been unable to make much headway after falling well below $900 an ounce. In contrast, other commodities have either topped their record prices or are still hovering near that mark.

Investment guru Mr Jim Rogers feels gold could decline to even $750 an ounce and he would not shy away from buying it. But the moot point is that the downward bias in gold continues. And the trend is likely to continue in the short term or at least until physical demand, especially from India, emerges.

Last week, the festival of Akshaya Tritiya was celebrated. During the last two years, this festival had seen large scale buying of gold. However, this year it was a different experience. Either consumers are staying away due to the high prices or the country is witnessing a new trend — where fast moving consumer goods and electronics are being preferred over the traditional safety haven of gold.

On the other hand, there are a few things that may lift gold. One is the $50-trillion unfunded liabilities of the US government. This is seen as one of the factors that can lead to inflation there.

The other factor that weighs on gold is that the market considers that the US Fed is through with its rate cut. And now, there are hopes of a rise in the rates. This could also act as an impediment to gold’s progress. Technically, gold faces resistance at $900. Support, however, is at $872. Standard Bank says the yellow metal could face problems at $889 itself, while support could be at $879.

The fact is that no big buying is likely to emerge until gold crosses the $894 mark. Other aspects worth noting are that non-commercial hedges by large speculators and hedgers’ position in commercial hedges stand unchanged at 44 per cent and 68 per cent of the total open positions. Back in India, gold prices are expected to take cues from dollar movements against major currencies in the short term, according to Angel Broking. The rupee is trading at a one-year low against the dollar, lending support to gold prices, as most of the metal is imported and paid in US currency. Overall, in the coming days, gold prices may be range-bound.

A rapid weakening of the dollar or movements in equity markets are the ones than can drive prices substantially higher. On MCX, June gold has support at Rs 11,710/11,480 for 10 gm, whereas resistance is seen at Rs 12,110/12,320 levels, according to Angel Broking.

Silver, on the other hand, is seen toeing gold. Support is seen at current levels of $16.65 for the white metal, while resistance is at $17.01. On MCX, July silver shall find support at Rs 22,330/21,760 a kg, whereas resistance is seen at Rs 23 330/23 750 levels, according to Angel Broking.

Crude oil prices have sky-rocketed in recent weeks, spurring concern that sharp price hikes could trigger inflationary pressures that can hamper global economic momentum. Combinations of forces have pushed prices higher, including market speculators, and a decision by the Organisation of the Petroleum Exporting Countries not to hike output quotas, according to Angel Broking.

For the coming week, the broking firm says, NYMEX June Oil futures are expected to find resistance at $129.20/$132.50 a barrel and support at $119/$116. MCX June futures could find resistance at Rs 5,420/Rs 5,610 levels and support at Rs 5,050/Rs 4,850 levels.

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