Gold has been showing quite interesting movements lately.
Last week, gold was lying at a three month low of $1,270 an ounce post the economic recovery and reduced safe haven appeal. This negative sentiment continued this week as Gold rose slightly but remained below $1,300 an ounce on Tuesday as the market focused on the U.S. Federal Reserve’s policy meeting and expectations for strong U.S. data, with prices underpinned by uncertainty over Ukraine. The Fed did give a positive and upbeat assessment of the U.S economy and announced another cut in its massive bond buying program.
Following the previous 3 tapers, The US Central Back reduced its monthly asset buying to $45 billion for the fourth time on 30th April. This $10 billion cut has compelled the market players to believe that further reductions in measured steps are likely.
Positive economic growth was visible from the reports released during the week. Gold further dropped post the release of the payrolls data, which showed that U.S. employers boosted payroll in April by the most in two years. Moreover unemployment rate stands at 6.3% which is much lower as compared to 6.7% last month.
This downtrend was further supported, as outflows from the world biggest bullion fund resumed after a one and a half week halt. Assets in the SPDR Gold Trust, the biggest bullion-backed ETP, fell 0.3 percent to 785.55 metric tons during the week, the lowest level since January 2009, according to data on its website. Outflows totalled 25.1 tons last month, more than offsetting combined gains of 19.9 tons in February and March
Spot gold fell 0.2 percent to $1,289.10 on Thursday, after losing 0.4 percent on Wednesday. Trading was thin as several Asian markets, including China, Hong Kong and Singapore, were closed for the Labour Day holiday.
However, traders remained cautious in expectation of further developments in the Ukrainian crisis and Friday changed the world scenario for gold as increased geo political tensions gave the yellow metal that much needed push. Demand for gold stepped up as the flaring of Ukraine’s violence started making markets nervous and pushes the international price of the Gold above $1300.
Ukraine sent armoured vehicles and artillery to retake Slovyansk, a stronghold for pro-separatist forces, defying President Vladimir Putin’s demand to pull back troops with Russia’s army massed across the border.
Acting President Oleksandr said that many pro-Russia rebels had been killed, injured and arrested in the eastern city of Slovyansk. In a statement, he said the operation in the rebel-held city was not going as quickly as hoped. Separatists shot down two Ukrainian army helicopters, killing a pilot and a serviceman and further injuring seven.
The UN Security Council met in emergency session at Russia’s request. In fact, catastrophic consequences have been signalled by Moscow’s ambassador if Kiev’s military operation in eastern Ukraine were not stopped.
Investors have now put the Ukraine issue above everything. As the week began gold was seen moving down post the Fed tapering, but rising geopolitical tensions and heavy short-covering helped bullion reverse an initial sharp sell-off.
2014, witnessed 8.4 percent gain in bullion amidst signs of faltering U.S. economic growth and mounting political crisis in Eastern Europe. Any elevation in the ongoing crisis will give a further push to gold.
After nearly three months of continued strikes over wages, Platinum mines in South Africa are still far away from solution. This is significantly increasing the buying interest and pushing prices to new levels.
What to expect next week:
1. ISM non-manufacturing PMI on Monday
2. Fed’s Yellen testify to Join Economic Committee on Wednesday
3. ECB press conference on Thursday.
The trade range for gold and silver is expected to be as follows-
In the international markets gold and silver are expected to range between $1277 – $1320 and $18.15 – $21.00 respectively. While in the domestic markets gold and silver are expected to move in the range of INR 29,000 – INR 30,500 and INR 41,000 – INR 44,000 respectively.