Gold is likely to decline below the support level of $870 before this weekend reducing demand for the metal as a hedge against the agricultural commodities prices.
However, the fall would depend on the announcement of Federal Open Market Committee (FOMC) on Tuesday. If the FOMC revises the benchmark interest rate downwards, then gold would see a turnaround. In case the rate is either raised or unchanged, the yellow metal would see a further correction of up to 3 per cent this week. This would translate into the price falling to Rs 12,120 per 10 gm in India.
| LOSING LUSTRE Precious metal price outlook 2006-2009 | |||||
| Cash price | $/oz | % Change | |||
| 2007 | 2008 | 2009 | 07/08 | 08/09 | |
| Gold | 695.00 | 940.00 | 850.00 | 35.30 | -9.60 |
| Silver | 11.55 | 17.85 | 16.00 | 54.50 | -10.40 |
| Platinum | 1305.00 | 1970.00 | 2250.00 | 51.00 | 14.20 |
| Palladium | 355.00 | 450.00 | 450.00 | 26.80 | 0.00 |
| Source: Natixis Commodity Markets | |||||
“We foresee the interest rate going up by 0.25 per cent or 25 basis points on Tuesday,” said Jayant Manglik of Religare Commodities.
On Tuesday, gold fell to $883.6 on reduced demand from India, the largest consumer, and China, the second largest consumer, as the Asian neighbours are currently passing through a lean season. This is the lowest fall since June 26.
Traders are offloading the commodity in anticipation that the Fed may keep the rate unchanged, leading to a renewed pressure on gold.
“We are expecting the yellow metal to hit lows of Rs 11,800 per 10 gm in the local market which would be a good buying level,” said Bhargav Vaidya of B N Vaidya & Associates.
Apparently, dollar, which moves opposite to gold, is currently trading near a seven-week high against the yen and has approached a six-week high against the euro.
Also Read
Gold for June delivery on the Tokyo Commodity Exchange fell to 3,127 yen a gm while the metal for December delivery on the Comex division of the New York Mercantile Exchange was down 0.9 per cent at $899.90 an ounce kerb trading late yesterday.
On the MCX, India’s largest commodity trading bourse, the metal for October delivery recorded a decline of Rs 350 to Rs 12,246 per 10 gm on Tuesday late afternoon from Rs 12,550 per 10 gm at the close on Monday.
On the basis of the recent turmoil in world stock markets, with many commentators now citing equities to have entered bear market territory, gold investment demand should remain strong.
Falls Rs 335
Tracking weak global cues, both the precious metals tumbled on the bullion market on fresh offerings from stockists.
Standard gold (99.5 purity) ended sharply lower by Rs 335 per 10 gm to one-and-half month low at Rs 12,135 from yesterday’s close of Rs 12,470.
Similarly, pure gold (99.9 purity) finished weak at Rs 12,200 from overnight close of Rs 12,535.
Silver ready (.999 fineness) dropped sharply by Rs 740 per kilo to Rs 24,100 from previous close of Rs 24,840.