Business Daily from THE HINDU group of publications
Monday, Sep 03, 2007
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Business Daily from THE HINDU group of publications Monday, Sep 03, 2007 ePaper |
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Gold & Silver Agri-Biz & Commodities - Outlook Gold needs a trigger to surge ahead
Technical analysts sound optimistic of a gold price surge soon. Weakness in metals reflects fund short-selling and covering of longs.
G. Chandrashekhar Mumbai, Sept. 2 Globally, commodities continue to be haunted by financial market problems. The panic caused by unsustainable levels of doubtful mortgage debt has resulted in investors turning rather cautious. Robust demand
Even as demand conditions remain robust and supply uncertainties have not waned, the tendency to liquidate long positions is evident. The risk appetite among investors seems to have receded, at least for the time being. But the possibility of investors returning to the market is always present. Ironically, in the present uncertain times, gold’s universally and traditionally accepted status as a ’safe haven’ investment has taken a beating. Whether or not it a transient phenomenon, time alone will tell. Friday last witnessed signs of an upward momentum in the metals market based on news that the US Federal Reserve and the US government intended to act to reduce any debt-market-related effect on US households and the economy. The week also saw an increase in oil price. Another development was the strike at one of world’s largest gold mines –Lihir gold mine in Papua New Guinea. Bulls to return
All these contributed to gold moving up. On Friday, the London PM Fix was $672 an ounce, up from $666/oz the previous day. It is likely, that gold bulls will return to the market sooner than many expect, as the commodity has been somewhat sedate for several weeks now. The supportive factors are all in place – stabilising fabrication demand, rising Chinese import, firm crude market and geopolitical concerns. Investors may be well advised to exercise extreme caution in taking large positions, though. The yellow metal has the potential to break out of the present impasse and surge ahead; but needs a strong catalyst or trigger. None is visible in the horizon at the moment. Technical analysts sound optimistic of a price surge soon. Metals weAk
As for base metals, the weakness over the past month reflects growing concerns from financial players about the effect of the sub-prime crisis on the US and world economic outlook and the potential harm this could do to the demand for base metals. No wonder, metals (except gold) have under-performed as compared with equity market. According to experts, the weakness in metals reflects fund short-selling and covering of longs and probably underscores the influence of financial players in the short-run price movement. Rebound likely
It is also pointed out that in some other markets where funds do not have an active role - such as steel, iron ore and coal - August was actually a strong month for prices. Tin and nickel had a relatively good performance last week. Led by copper whose fundamentals remain solid, prices, on an average, are likely to rebound in the coming weeks. Demand conditions continue to inspire confidence.
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