Overall, it was a good week for gold as prices rallied with a weekly gain of 3.1 percent, following a spate of negative numbers from the US which unsettled investors and weighed on the dollar.
Let’s have a look at the important highlights of the week:
- US retail sales on Wednesday at 0.0 percent missed consensus of 0.3 percent while the core figure at 0.1 percent fell short of the expected 0.4 percent gave the yellow metal the impetus to move higher
- Holdings in the world’s largest gold backed exchange traded fund, SPDR Gold Shares, fell 0.61 percent on Thursday to a four month low of 723.91 tons
- Physical buying slowed in Asia as higher prices kept some consumers away. In China, premiums eased about 50 cents to $1 an ounce over the global benchmark on Friday, from premiums of $2-$3 earlier in the week
- Industrial production in the U.S. declined in April, reflecting a drop in mining and utilities output, a report from the Federal Reserve showed Friday.
- Hedge fund and money managers increased net long positions in Gold and Silver ended May, 12th – U.S. Commodity Futures Trading Commission data showed on Friday.
- Geopolitical tension surged in Iraq where Islamic State militants said they had taken full control of the western Iraqi city of Ramadi on Sunday in the biggest defeat for the Baghdad government since last summer.
- A surprise drop in US producer prices in April, signaled heightened disinflation risks plaguing the world’s biggest economy
- Silver has been a part of 8% rally which places it strongly in the channel where it leads the precious metals group with gains over the whole year.
There have also been reports that Europeans are snapping up gold in fear that a Greek exit from the euro zone could wreak havoc on the economy.
While on US front, The longer the flow of poor data exists, the greater will be the doubts on US economy. Economists predicts that the Fed may raise short term interest rates in September while the other chunk of the market predicts that the hike may get delayed until later in fourth quarter or even next year.
I do agree that US data continues to dominate the market’s movements with physical support going a bit low as the price rise, but for this rally to sustain, I strongly feel that all the factors of momentum need to be pressed at the right time. Otherwise the rally is bound to fade. A key technical resistance of US$1238 needs to be taken out of GOLD.
If we see all the factors that are influencing Gold and precious metals price movement, one common rule is generated which needs to be followed. You should not abandon precious metals be it Gold or Silver or Platinum. They are rare, have the status of safe haven, central banks monetary policy support and used in something that everybody loves: jewellery. Every buy on dips is worth the money.
|GOLD||$1210 – $1250 an ounce||Rs.27,000 – Rs.29,000 per 10g|
|SILVER||$17.00 – $18.00 an ounce||Rs.39,000 – Rs.42,000 per kg|