Gold Commodity prices might initially continue to trade higher. It could be because of the January effect that gold investors are now buying gold due to cheaper availability rates. However, the overall trend has not changed yet. Meanwhile, global equities are trading down and likely to extend their losses in the next week, which might push gold prices higher. Gold prices have rebounded smartly from $1180 and may remain marginally higher in the very near-term unless any fresh cues are noticed in the market. From Asia, the spot demand continues to be better, especially in India which could keep gold prices higher and, it is likely that the spread difference between the two futures contracts may also widened into a backwardness. So, the initial few sessions of next week might see gold prices rising. However, we also wish to notify to our investors that unless the $1253 level is breached, we shall not turn completely bullish on gold prices. Looking at the economic data front, the details of which have been explained in our in-house weekly economic report lead us to point out a few key releases expected in the next week such as the US employment data and the ECB rate decision. As it has been historically noticed, gold prices generally become highly volatile due to US employment data, a trend which is expected in the next week too. Since we have expressed our view that gold prices may initially go up until $1252 and that thereafter, the market may remain a bit cautious; prices may show a slight correction. Before we finish our outlook, we would like to talk about the GOFO rate which is negative for the one month forward while the six months and twelve month-forwards are also low. It has been historically noticed that anytime the GOFO falls into negative territory, gold prices tend to move higher and the same has been noticed in the week gone by. We expect the same trend in the first few sessions of next week however, if we take a critical look into the GOFO performance, the 1-month GOFO is in negative but has been recovering slowly, indicating that after an initial recovery in gold prices in the next week, it may again turn down.

In general, we hold a view that gold prices might initially rise during next week while from prices might decline from the higher levels. At the local market, Rs 29,371 continues to be a strong resistance and so, unless that is cleared, we shall not turn completely bullish on gold. Therefore, for the next week, we may not release a weekly positional call in mega lots, while we insist that our traders take intraday positions on gold for mini-trades

Silver Spot is trading at $20.13 up by 9 cents from its previous week’s close. At the domestic market silver prices too traded higher at Rs. 45,252 up by more than Rs. 120. We could see silver prices under performing gold in the last week as the former has taken cues from equity performance. In the last week global equities-US/Europe traded down and base metals too traded mixed to slightly lower. However, prices had witnessed a strong sell off at the beginning of the week making a weekly low of Rs. 42,435 while it reversed strongly in just two trading session along with higher volume. So, we believe silver prices might initially trade higher in the next week. However, as the day’s passes we could see silver prices becoming highly volatile. As discussed in the gold section and in our weekly in-house economic report we have loads of important data from the US in the form of payrolls, FOMC minutes and the ECB interest rate decision. Although FOMC and ECB may not provide much clues but any comments could bring in lot of volatility in prices while payroll data should develop huge movement in the prices. Since the overall trend is bearish we believe initially silver prices may advance while in the later part prices may correct along with gold. As discussed any further sell off in equity markets may help silver prices to fall more than gold. Unlike last week we wish to change our view and recommend a ratio strategy in which we recommend selling silver and buying gold futures contracts for half of the week while in the later part we would do the reverse. We are taking such stance in the market as price trend and the factors expected in the next week may bring in lot of volatility in prices

Commodity Trading

GOLD MCX FEB BUY ON DECLINE NEAR 28750 SL 28480 TGT 29050-29250 {OR} SELL ON RISE NEAR 29300 SL 29700 TGT 28900-28650.