FOMC Meeting and Commodity Advisory Services
Gold Commodity Market Advisory Services advises this week, we have the critical two days Federal Open Market Committee Meet wherein its outcome would be released on 17th late night (IST). While on one hand the FED is seen cutting down the monthly bond purchases for another month, more importantly its comments over interest rates, inflation and economy would be tracked. As per a Bloomberg report, probability that the US Fed would increase benchmark interest rates to at-least 0.5 Percentage by July 2015 enhanced to 60Percentage the futures trading shows. The likelihood was 52Percentage by the end of August. The same aspect is also getting reflected in US 10 Yr Government Bond yields which are set to see a gain of around 4 Percentage, second week in a row, currently hovering near 2.55 Percentage; it’s best since July. We may see rise in yields continuing in case Fed talks about rates in-line with what markets are expecting. Rising bond yields, in the US on account of Fed meeting expectations is putting heavy pressure on Bullion complex as both gold and silver have been one of the major beneficiaries of the ultra-low rates which the Fed has maintained since 2008 crisis. We agree that actual increase in rates, in any case is far away from current state, markets are already building a negative case over the same and its impact can be visible on gold commodity which has been one of the worst performers in the commodity and equity basket over past quarters and also on a yearly returns ending 2013. In last weekly reports too, we had talked about the weakening demand scenario for the commodity on the Paper gold front. There are no major changes as SPDR ETF saw its holdings further recede to near 785 MT mark while we could not see any optimism over Physical side as well. India which is one of the world’s largest consumers of gold increased its import duty for the commodity to 10Percentage last year so as to reduce imports and help smoothen its economical issues over higher CAD. Recently the GoI officials re-iterated the stance that Import duty hike would continue to remain in place in medium-term. This may not be seen positive for gold which usually gets good seasonal demand in the second half in India led by festival an marriage season. Also traders locally are keener over investing in equities which lately have been making fresh records and already delivered over 20Percentage returns in 2014 as against net negative returns in Gold locally. Weaker immediate demand expectations for the commodity can also be seen from MCX calendar spread which has been witnessing increasing continuo over last three weeks with latest quote (MCX Dec – MCX Oct) standing at Rs 180 per 10 Gms mark as against Rs 145 for week ended 30th August 2014. While actual physical demand remaining subdued in India is a medium-term story, next week we could see huge volatility in the commodity with bias continuing on the weaker side led by US Dollar rising, FED meet and broadly positive US economic cues. We recommend selling the commodity going on pullbacks. Risk alongside our view: As we supposed above, markets expect the Fed’s stand to be a bit hawkish, in case it turns the other way around; we may see good correction in the US Dollar which indirectly could push Gold prices higher. So recommend traders to keep their positions tight, keep strict risk-reward based approach and be ready for good volatility in the commodity and the broader markets as a whole.
Gold Oct MCX futures prices fell sharply in the last week by continuing the previous week’s trend. As of 12 September, 2014 prices are trading at 26877, down by -1.8 Percentage from the previous week close. Prices are expected to see a higher correction before resuming its downtrend. Key resistance level to watch is at 27100, which is 27250, which is expected to limit the upside move. For short term traders we suggest selling Gold Mcx Commodity Trading Market Weekly Trend: Down Support on down side at 26332-26366-25942 Resistance on upper side at 27322-27746-28170 Trend deciding level at 27056 Silver Mcx Commodity We are holding a similar view as in the case with gold commodity wherein, the whitish metal too is expected to register good volatility due to host of economic and monetary policy cues from the US and other western economies. During the week gone by, we saw a bit of a curious case between gold and silver as during initial days of the week, as gold fell marginally silver was managing to outperform gold notwithstanding the healthy drop being registered in base metals complex both globally and locally. As we have been updating earlier too, silver as a commodity gets mix of demand from precious and industrial segment wherein pricing too is dependent on movements in the two. Good for us, we got sharp fall in the commodity in latter half and we are finally seeing bigger losses in silver which also favored our strategy view on the Gold/Silver $ Spot ratio side during the week. On one side, we maintain our selling bias in the commodity backed by weakness in gold and also pressed by subdued set of economic data from China; we also hold our last week’s positive view in the Ratio. We recommend initiating longs on pull backs for targets near 68 in petite time. Silver Mcx Commodity Trading Market Weekly Trend: Down Support on down side at 40755-40200-39390 Resistance on upper side at 42120-42930-73741 Trend deciding level at 41566 Commodity Advisory Services Tips Sell Gold Mcx Oct on Rise at 27000 sl 27200 Tgt 27800-27500 Sell Silver MCx Dec on Rise at 41500 sl 42050 Tgt 40950-40600