Gold and silver weekly outlook and commodity tips

Gold and Silver Weekly Outlook and Commodity Tips

Gold Comex June future is seen trading at $1300, down by 1.40% from its previous week’s close. Likewise, in the MCX Gold Commodity platform the same contract traded down by 0.80% at Rs. 28,544. There is a slight divergence between COMEX and MCX gold prices due to currency depreciation. Indian rupee spot prices ended the week at 60.33 down by 0.43% from its previous close. Overall, the gold commodity has been into a bearish leg for the past several months and likely that the trend may continue in the near term. However, in between we saw a good amount of price recovery due to continued geo-political tension between Russia and Ukraine. Nonetheless, the other fundamental factors are still suggesting weakness in the commodity. From the investment front, the SPDR gold trusts the largest ETF backed by Gold has declined its holdings from 804 tons to 798 tons indicating investment demand is still low.

Meanwhile, poor Chinese economy is driving physical demand lower also pulling the commodity lower. We believe as long as China continues to remain under concern the gold demand may remain muted and that should keep the prices lower. The other market dynamicsrising USD index and falling euro currency is also driving gold lower .We believe the similar kind of scenario may be noticed in the near future. From the inventory front, at COMEX the stocks have risen in the recent past suggesting that the physical demand is lower and as long as stocks continues to trade higher we could see gold prices managing to trade below $1300 mark. The equity market performing in green especially the US indices is suggesting that the global investors’ are reluctant in buying the gold commodity as an investment asset.

Looking at the above scenario we believe that gold commodity may remain lower in the near term. The risk factors that are likely to keep the commodity away from huge fall are the slight improvement in the PPI/CPI numbers of US and Europe. Also, the 10 year treasury yield is managing at 2.64% indicating that the lower yield could bring in slight demand for the commodities. For the next week we hold a bearish view on gold while we also believe that by end of next week or early next there may be a good bargain buying in gold from lower levels Gold MCX June Commodity future prices saw volatile movements in the last week, moving in the range of Rs 28200-28986. As of 17 April, 2014 prices are trading at Rs 28526, down by 0.79% from the previous week’s closing. Technical indicators like the weekly exponential moving averages (8,13 & 21) and weekly relative strength index (14) are both supportive of the downside movements. For short term traders, we suggest selling at the higher levels.

Gold Weekly Trend: Sideways Up Support at 28100-27400 Resistance at 29100-29500 Silver followed the broader trend in the complex and as of Thursday evening session (IST) we are seeing May month contract at Comex is standing at $19.65 per ounce levels, lower by 1.6% for the week. While we had a selling view in the whitish precious metal as well, we also suggested a Ratio strategy wherein we recommended buying Gold and selling silver with an anticipation that silver would underperform gold and eventually increasing the ratio. The same held correct wherein particularly during the middle sessions of the week, gold/silver ratio for Comex active contract touched near 67 levels.

Our negative stance on the commodity was also build in by the fact that we expected continued demand pressure coming from Chinese markets, world’s largest consumer of the commodity along with expected increase in the USDX. While US dollar moderately cut losses this week, equities across the US and Europe performed well and mainly US indices flied high. Negativism for the sector was supported by positive set of economic cues from the US mainly on manufacturing related sector. While broader factors for the commodity have not changed much, we are holding our negative bias into commodity for the next week too. As also stated in previous week, underperformance in silver in a week when base metals recorded smart returns tells about the inherent weakness in the commodity.

In the current week, we saw decent increase in the metals complex, despite which silver saw higher fall as equated to gold. The benchmark LMEX index for LME traded base metals managed to hold near last week’s high mark after around 2.5% uptick in immediately preceding week. As investment related demand not being able to provide any support to the commodity and weakness in Gold anticipated continuing, we feel silver too would continue to trade on a weaker note and thus suggest selling the commodity on pullbacks. In-fact we are also holding our bullish view on the gold/silver ratio albeit the pace of increase in ratio might not be as high as been the case in previous few weeks Silver’s MCX May Commodity future prices saw a downside fall in the last week. As of 17 April, 2014 prices are trading at Rs 42408, down by 1.80% from the previous week’s close. Prices are witnessing a strong resistance at Rs 43840, which is expected to hold the downside view for the week ahead. A break below Rs 41500 could confirm further weakness in the near term. For short term traders, we suggest selling at the higher levels.

Silver Weekly Trend: Sideways Support at 42300-41200 Resistance at 44000-45500 Commodity Tips Sell Gold Mcx June near 28650 sl 28970 Tgt 28400-28100 Sell Silver Mcx May near 42780 sl 43850 Tgt 41600-41000