Overseas bullion may correct on dollar gains

Overseas gold and silver prices are expected to correct from current levels, said analysts and traders.

The strong economic data from the US are likely to result in the dollar strengthening against major currencies.

Overall, gold is expected to trade in the range of $435-425 an ounce and silver $7.20-7.60 an ounce next week.

Traders expect a lull in physical demand after the Diwali festivities in India, the world's leading gold consumer, next week.

"The (overseas) gold prices may peak at $438-439, supported by strong physical buying from Indian players. However, thereafter prices may decline by about $12-10 next weak on fall in demand, after the Diwali celebrations end," said a leading trader.

"Silver (overseas) would peak at $7.61-7.63 level. Thereafter, it could retrace back to $7.38-7.48 levels. A fall of 20 cents in the overseas prices could lead to a fall by about 300 rupees a kg," he said.

"A correction is expected next week in gold and silver prices. This is following the release of U.S. dollar favourable economic data on jobs, trade deficit, and U.S. interest rate hike," said Ganashekar T, an independent precious metals analyst.

The US Federal Reserve's Federal Open Market Committee raised the benchmark interest rate by 25 basis points to 2 per cent on Wednesday, citing a strong growth in jobs market.

US non-farm payroll data released Friday showed a growth of 337,000 and was more than the market expected figure of 160,000. US trade deficit narrowed down to $51.60 billion in September from the August's revised number of $53.50 billion.

"The US dollar could rise to around $1.2770 level against the euro," he said. "Gold (overseas) would see a very strong support at $423-425 level," he said.

"Silver would find a good support at $7.20 and would face an initial resistance at $7.50, with next resistance pegged at $7.65 level," he said.

James Moore, precious metals analyst, TheBullionDesk.com, said in a daily note, "the Hindu Diwali and Muslim Eid Al Fitr holidays will slow some physical demand (for gold) over the next couple of days."

"But good scaled down support should continue to be found from $430-25 while $440 still appears to be the market's upside target," he said.

"Good support (for silver) should continue to be found from $7.25-7.30 although the scale of speculative interest in silver continues to suggest a dip back to $7.15-7.00 at some stage in the near future," Moore said.

The closing price range for gold of 0.999 purity in the domestic market this week was Rs 6,500-6,525 per 10 gm. For gold of 0.995 purity, the range was Rs 6,465-6,490 per 10 gm.

The closing price range for silver of 0.999 purity was Rs 12,060-12,090 per kg.