Business Daily from THE HINDU group of publications
Monday, Jun 19, 2006
Business Daily from THE HINDU group of publications Monday, Jun 19, 2006 |
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Gold & Silver Agri-Biz & Commodities - Commodity Markets Sentiment fragile in bullion market G. Chandrashekhar
Mumbai , June 18 It may be too early to say if the global commodity market was bottoming out; but last week's positive performance of the various markets - stocks, commodity - seems to have injected some energy among participants. After losing over 11 per cent, go - from a low of $543 an ounce early last week to about $581/oz on Friday - has helped lift investor confidence. The performance came in tandem with a recovery in global stock markets and the broader commodity complex. A weakening dollar added to the positive momentum. Yet, the bullion market sentiment remains fragile. In the short-term, market conditions are likely to remain nervous and volatile.
REAL POTENTIAL
Importantly, the potential for the macro-economic environment to become more favourable towards gold is real. It is on the back of rising inflationary pressures and expectations of future dollar weakness that many see an upside for gold. When will it materialise or how long it would take is of course a matter of debate. Gold is likely to trade in a choppy range week beginning June 19, between the 100 and 200 day averages of $600 and $547 an ounce respectively, according to a London-based technical analyst. Interestingly, given the ongoing clearout, analysts view consolidation below $582/oz as a bearish development and they target $530/oz later in the month.
MEDIUM TERM PROSPECTS
In the medium term, however, prospects for gold are more positive with the potential for new highs to be tested later this year. More important than demand-supply fundamentals, the dollar seems to hold the key to future gold prices. Forex strategists see the recent dollar strength as due to substantial liquidation of short positions in the USD on the back of capital reallocation and in a general curtailing of risks. They expect the dollar to lose its momentum once the ongoing process of risk reduction comes to an end. So, watch the dollar closely for investment in gold.
More Stories on : Gold & Silver | Commodity Markets
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