On the first day of last week, gold was down. But it changed direction by Wednesday and bounced back.
This week too there was a lot in store for gold-
- the GDP for leading economies including Japan, Germany, and Great Britain
- the U.S PPI, retail sales, industrial production JOLTS, jobless claims and consumer sentiment reports .
- Germany’s economic sentiment and GB’s inflation report.
- Gold for the month of July was up by over 2 per cent mainly due to the escalating global tensions and the lower than expected US data
As the week began, gold was slightly down, retreating from a three-week high as tensions between Ukraine and Russia eased and investors turned to rising European shares and some withdrew from exchange-traded gold funds. The United States had criticized Russia’s military exercises in Southern Russia as provocative step in The Ukraine Crisis. But last week, late on Friday, Russia’s Defence Ministry said that it has ended these exercises. This was the main reason for pushing gold prices down. The premium that was built on gold since mid June is more vulnerable to fade as easing Geo-political tensions push gold prices down.
There is a lot of uncertainty in the market surrounding the FED’s decision to raise interest rates, that now many market players aren’t quite sure whether they should go back to gold particularly when other assets like equities look more attractive.
But how soon will that happen? Nobody knows… Till then Bullion investors will continue to monitor U.S. data releases as the strength of the world’s largest economy dictates the pace at which the Federal Reserve tightens monetary policy.
After a few lows, gold stabilized on Tuesday as signs emerged that the stand-off between Russia and Ukraine was hurting confidence in the euro zone economy and on fears a Russian aid convoy heading to Ukraine could further stoke tensions. Concerns over the Ukraine crisis and its financial impact hit economic sentiments in Germany.
Gold is always seen as an alternative investment medium over equities and other assets.
On Wednesday, Gold was above $1300 on Wednesday as downbeat data from China keep investors cautious about gold. This along with the Ukraine crisis and a slowly recovering US economy kept gold prices firm.
Bullion was also helped by data on Thursday that showed the number of Americans filing new claims for unemployment benefits rose more than expected last week. That helped push US yields lower. Spot gold rose 0.2 percent to $1,315.20 an ounce by 1003 GMT,
A weak dollar and sluggish US and European data provoked investors to switch to safer investments.
Gold prices were slightly lower on Friday, paring losses on safe-haven buying as equity markets slid after Ukraine said its forces had engaged a Russian armored column on Ukrainian soil in what appeared to be a major military escalation. It was like a roller coaster ride from a near high of $1310 to $1292 and then back to $1310 and a close above $1300.
Apart from the Data reports and the crisis, it was the sluggish physical demand for gold that played a influential role. Physical demand in top consuming region Asia has been sluggish after a record year in 2013, while investors have been cutting positions in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund. The fund reported a 5.36 tonne drop in its holdings last week, its largest outflow since early May.
For the time being the market seems to be bearish for gold (apart from the perceived geopolitical tensions) and I feel investors should sell on the upside.
|GOLD||$1281- $1320 an ounce||Rs. 27,800- Rs. 29,000 per 10 gram|
|SILVER||$19.15- $20.20 an ounce||Rs. 42,500- Rs.44,500 per kg|