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G. Chandrashekhar

Mumbai March 14

Gold held above $540 an ounce on Monday and in early trades on Tuesday, after recovering from the heavy downward pressure last weekend, with liquidation triggered by stronger-than-expected US payrolls data which not only supported the dollar but also boosted expectations of further rate hikes.

The prospect of rates tightening across the major economies has been affecting market sentiment, justified on concerns of increasing bond yields and a reduction in excess liquidity (some of which had entered commodities including precious metals).

"Hence, comments from central bankers going forward are likely to keep the market edgy," commented an expert.

CFTC data too captured the activity of tactical investors on Comex at the start of sharp price correction last week.

Exposures cut

Speculative net exposure was cut on a combination of long liquidation and short selling. The gross long position is still large and hence, prices remain vulnerable to further liquidation.

From a technical perspective also, there remains the risk of another push lower near-term, but the weakness may be limited to $530-535 an ounce.

The Indian market continues to respond to international price changes. While a section of consumers are increasingly getting used to higher prices, a certain demand compression at these levels is clearly visible. A combination of strengthening rupee and less volatile prices is sure to encourage demand growth.

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