Gold loses steam as correction sets in

INTERNATIONAL BULLION REVIEW

Gold, currently passing through a correction phase, was quoted at Rs 6,895 (99.5) per 10 gm on Friday compared with Rs 6,955 per 10 gm in the beginning of the week in the spot Mumbai market.

Similarly, gold (99.9) was sold at Rs 6,935 per 10 gm on Friday as compared with Rs 6,990 per 10 gm on Monday, a loss of Rs 55 in the week.

The metal can, though, still climb to the Rs 7,200 area on the back of strong fundamentals and rising demand from consumer countries. The marriage season is nearing and demand is expected to increase in the times ahead.

December gold futures on the Multi Commodity Exchange (MCX) was hovering around Rs 6,890 per 10 gm on Monday with a volume of 175 kg. Traders though abstained from voluminous trading on the back of news of a bearish global market.

The volume in December trade slid to approximately 2.5 kg and price to Rs 6,818 per 10 gm by Friday with traders preferring to wait and watch.

A similar trend was seen in February future where the week opened with a volume of 614 kg due to Dassera with prices touching Rs 6,910 per 10 gm. But, towards the end of the week the price declined to Rs 6,836 per 10 gm. Gold witnessed a turnover of Rs 6,777.89 crore during the period between October 7 - 14 with a total volume of 99,089.40 kg. Despite such massive gold trade, prices went down by Rs 22 from Rs 6,836 to Rs 6,814 per 10 gm. Gold futures for February also went down proportionately by Rs 26 to Rs 6,834 per 10 gm.

Experts believe that further sideways movement and even a test of former key resistance in the $450-$455 range cannot be ruled out. Finally though, gold is expected to touch $500.

December gold on Friday closed at $471.80 an ounce in New York, down $2 for the session and down 1.2 per cent for the week, its weakest level since October, 6. Prices, however, were still up $18.10 from the month-ago close. US economic data - including the Consumer Price Index, retail sales and industrial production - appeared to have limited impact, analysts said.

The December futures have been receding since reaching $483.10 in the earlier review week. Gold fix in London ended the week on Friday at $466, a loss of $5.80 from Monday's close.

Spot gold traded on the Shanghai Gold Exchange closed lower on Friday, as overnight losses in international spot gold spurred fresh selling ahead of the weekend. Spot gold (99.5) in Shanghai lost 0.44 yen per gram to close at 122.58 yen per gram, or $471.37 a troy ounce.

The benchmark fell as Chinese commercial banks focused on liquidating their holdings, finishing near an intraday low of 122.52 yen per gram. Gold 99.9 price in Shanghai fell 0.39 yen per gram to end at 122.69 yen per gram, or $471.79 per ounce.

However, a decline in price helped increase in volume to 1,063 kg on Friday from 1,025 kg on Thursday. Leading traders in India said fundamentals have not changed much. This appears to be a temporary correction which would be soon overcome and gold would glitter healthily in the weeks ahead.