Commodity Analysis

Gold bounces back sharply

Rajalakshmi Nirmal | Updated on November 22, 2014 Published on October 12, 2014



Worries on global economic slowdown pull gold from lows

Gold retracted from the support at $1,183 a troy ounce and closed the week with a gain of 2.7 per cent. It touched a high of $1,233 and closed at $1,223. Other precious metals too recorded strong gains. Platinum recorded a gain of 3 per cent and ended the week at $1,262/ounce. Silver closed at $17.39, up 3.2 per cent.

The minutes of the Federal Reserve’s September meeting that was released mid-week revealed that the central bank was concerned about weakness in the global economy particularly in the euro zone, and was not in a hurry to tighten its monetary policy. The IMF had early last week, lowered its world economic growth rate from 4 per cent to 3.8 per cent for 2015.

The Fed officials’ concern about rising dollar also turned out to be a positive for gold. The US dollar index slipped to a low of 84.93 on Thursday and closed the week at 85.91, down from 86.69 in the previous week.

These developments however couldn’t bring back gold ETF investors. The US SPDR Gold Trust continued to see outflows. The fund’s holding were reported at 762.08 tonnes, down from the previous week’s 767.47 tonnes.

Cues to watch

Gold may, in all likelihood, stabilise at the current levels or move slightly higher this week as physical market buyers come in and traders cover up their shorts. In the US, retail sales data will be released on Wednesday. Thursday will see release of jobless claims and industrial production data. On Friday, the housing starts number will be out.

From the dovish tone of the Federal Reserve it appears as if rate hikes will not happen in the near term. With concerns expressed over slowdown in world economies, the Fed may not do anything that will strengthen the dollar further and hit the emerging and other markets. When dollar strengthens, American exports become expensive for other countries, which then would start importing from elsewhere. This will hit the US companies and their economy which is just trying to move out of the woods.

On the charts

If gold moves above $1,233 and remains above it, its short-term trend will turn positive. This week, there is a strong possibility of the gold scaling up to $1,230 and $1,240.

The sharp rebound from $1,183 last week shows the existence of a strong support at that level. In the short-term thus, the metal may not break below $1,180. Silver, however continues to be weak.

Till the time prices remain below $18, it could move sideways with probabilities open for a further correction. If $18 is reached, the next target would be $18.5 with a strong resistance at $19.

Published on October 12, 2014

A letter from the Editor

Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Support Quality Journalism
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.