The week was interesting for gold especially for gold traders and investors, as they enjoyed the doubts surrounding the dramatic and volatile moves which later kept the market wondering whether the yellow metal will be bullish or bounce back from its high prices.
Last Monday’s price action promised much, promptly reversing the previous Friday’s losses and surging back above the resistance level at $1190 per ounce to close at $1203.20 per ounce. This bullish sentiment continued into Tuesday, albeit on dropping volume with the price action just managing to breach the resistance at $1210 per ounce, thereby giving longer term investors hope this could be the start of some sort of retrieval.
However, Wednesday’s price action was unable to follow through, before Thursday’s dramatic move when the gold bears once again took control, sending gold prices hitting through the $1190 per ounce support region, accompanied by high volume and validating the move lower.
Friday’s price action followed through with further selling, but on lower volume as the platform of support in the $1174 per ounce region was duly tested before gold closed the week at $1174.50 per ounce. Spot gold was last at $1,171.70/1,172.60 per ounce, down $11.50 on the previous session’s close and around intraday lows – it struck its cheapest since March 20 at $1,170.20 earlier.
The precious metals’ moves may have been worsened as parts of China, India and parts of Europe were absent for May Day holidays.
But there is a bullish sentiment for gold in the market. SPDR Gold trust, the world’s largest gold-backed exchange-traded fund, said its holdings rose 0.32 percent to 741.75 tonnes on Friday.
Currently, Equities seem to be in a bubble zone and are prone to devaluation. In such case there is a chance that both Wall Street and world stock markets will tumble down especially when there is clarity on signs that the Fed is beginning to tighten-up its current zero interest-rate policy – and this could be the spark that triggers a resumption of the long-term bull market in gold.
Factors that support this bullish sentiments are-
- Persian Gulf Crisis
- Russian- Ukraine escalating tensions in Europe
- Greece default
- Increase in demand for gold as a safe haven appeal keeping in mind the above mentioned points
Thus yet another volatile week waits for gold as investors and traders prepare for April’s employment report on Friday. Volatility will be an important factor for the gold market next week and the ones that will be actively creating volatile situations are:
Employment Report: Currently there are expectations in the market that the U.S may have created 210,000 jobs in April. If it so happens then gold prices are expected to remain near the bottom end of their current range and if employment comes in above 200,000 then prices could fall below current support.
Other Data: Although the biggest data report will come at the end of the week, ahead of the employment report, markets will receive ISM non-manufacturing data on Tuesday and private company employment data from ADP Wednesday.
Britain: Apart from the key economic indicators coming in from U.S, there are chances that Britain’s federal elections on May 7 could have an impact on gold markets is the results show a majority for Conservatives, who have said that if they win they will hold an referendum on its membership to the European Union by 2017. Analysts have noted that a Britain’s exit from the EU could pose a threat to the euro, which would create safe-haven demand for gold prices. Currently polls show a close race between Britain’s federal parties.
Reassessment of economic prospects – and revised financial-market expectations of Fed policy – sometime in the next few months could support a spring-summer recovery in the price of gold, lifting the yellow metal up and out of its recent trading range.
Until that happens, gold prices will likely remain “range-bound” in the short term, perhaps through midyear or longer, trading mostly between a floor price of $1,175 and a ceiling around $1,225.
As these boundaries are approached or briefly broached, technical traders will continue to step in as buyers or sellers, respectively, keeping the yellow metal’s price relatively stable within this range.
Despite some disagreement among the voting members of the Fed’s FOMC policy-setting committee, the Fed will likely honor its pledge not to begin easing up on interest rates until the economy shows clear signs of a continuing and sustainable expansion.
|GOLD||$1163-$1207 an ounce||Rs.26,500- Rs.27,300 per 10g|
|SILVER||$15.73-$16.48 an ounce||Rs.35,000- Rs.38,000 per kg|