Rally to Move Higher and Stock Market Tips

Preceding week, the Bombay Stock Exchange Sensex opened at 21080, attained a low at 20921 and moved to a high of 291961 before it closed the week at 21920 and thereby showed a net rise of 799 points on a week-to-week basis.

A breakout and close above 21483 was witnessed on the weekly chart which suggests that a near term rally towards 22853 is likely to be seen with volatility. Depending on the speed and momentum on the Sensex, the upside higher target of 22853,-27105-34650 will be tested in due course of time.

For the immediate near to short term, the focus will be on 22853. Weekly support will be at 21600-21240-20920. Weekly resistance will be at 22280-23320.

The monthly candle at February 2014 end was strong. On the monthly chart, the Sensex has formed a Piercing Line candlestick pattern against the January Engulfing bear candlestick pattern. On the monthly chart from a two month perspective, it has been a tug-of-war between the bears and the bulls. The month of January 2014 belonged to the bears whereas February 2014 belonged to the bulls. Now March 2014 offers follow-up rise and bulls have kept the control in the first week of March.

BSE Mid Cap

The recent peak of 6802 will be tested. In the event of a breakout and close above 6803 on the weekly chart will show a rally towards 7177-7392. Weakness can be restored on a close below 6400. The momentary bias is to move higher.

BSE Small Cap

Expect a rise to test 6717. On a further breakout and close above 6720 will lead to a rise towards 7063 at least. Weakness will be seen if the close is below 6400.

BSE Bankex

A massive weekly rise was seen with gains of 1282 points on the BSE Bankex. Expect 13928 to be tested. In the event of a further rise and weekly close above 13928 will lead to rise towards 15335. Sustainability above 13928 will be crucial after the big rise of 1282 points last week. Correction to 13113-12588 can be used as an opportunity to buy banking stocks. Since the rise was sharp, intra-week correction possibility cannot be ruled out in the uptrend, which has resumed now.

Strategy for the Week

Traders long on index and index related stocks can keep the stop loss at 20900. The low registered last week was 20920. The buy range mentioned last week was 20965-20791. The buy range was tested and the close was higher at 21919, which gave a massive gain and opportunity to profit.

Stock Market Tips

Weaker opening and correction to 21600-21240 can be used for buying with a stop loss of 20900. Expect 22280-23320 to be tested with volatility.

Nifty Weekly Resistance at 6555-6600-6644

Nifty Weekly Pivot at 6422

Nifty Weekly Support at 6377-6333-6288-6244

Sensex and Nifty Weekly Technical Analysis and Stock Trading Tips

Sensex Resistance will be at 20481-20513. Weekly resistance will be at 20583-21100. Weekly support will be at 20066-19549. Traders short can keep the stop loss at 20600. Cover short positions at 20273-19900. Sell on a fall below 19900 with the high of the week as stop loss or 20600, whichever is higher. Sell on rise to 20899-21133 with a stop loss of 20200. Minor pullback seen unless 19900 stands violated

Previous week, the BSE Sensex opened with a gap down in relation to the previous week’s closing of 20513.85. It opened at 20479.03 and maintained the high for the week at 20489.35. The fall to 19963.11 marked the low for the week while it finally closed the week at 20376.56 and thereby showed a net fall of 137 points on a week-to-week basis.

The support of 20137 was tested and 20100 were violated but it closed the week at 20376.56. The retracement of the last rally from 17448 to 21483 is placed at 19947, 19448 and 18985. The low of last week at 19963 was very near the 38.2 percent retracement level of 19947. We, therefore, assume that the first retracement was tested. A pullback of the fall from 21483 to 19963 is likely to be seen before putting the pressure back on 19963.

Further weakness or correction will continue on a fall and close below 19900. If that happens, then expect 19448 and 18985 to be tested.

Resistance will be at 20481-20513. Weekly resistance will be at 20583-21100. Weekly support will be at 20066-19549. The pullback retracement levels are placed at 20515, 29686 and 20903. For the near term to short term, a pullback to retracement can be seen. If a stronger rise and close above 21100 happens, a rally towards the top may be seen.

On the daily chart, we have gaps that can provide resistance. The gaps are at 20572-20647 and 20899-21133. These gaps will be tested and can also offer resistance. The pullback to resistance levels, retracement and gaps can create a lower top and could subsequently test back the low of 19900.

Alternatively, if there is a fall immediately below 19900, then expect it to test the 19448-18985 range.

BSE Mid Cap Index

Further correction can be seen below 6180. Expect a pullback first to the levels of 6420-6495-6570.

BSE Small Cap Index

Further correction can be seen below 6164. If that happens, then expect the range of 5980-5880-5688. If the support of 6164 is not violated, then a pullback to 6374 to 6508 could be seen before putting pressure back on 6164. If the slide continues below 6164 then anyway the trend is down.

BSE Bankex

Retracement of the last rise from 9535 to 13928 was seen. The 50 percent-61.8 percent range is at 11712-11237. The low registered last week was 11373. Expect 11979-12359-12645 to be tested. A pullback can be seen in the near term before putting pressure on the support of 11373.

Strategy for the week For Sensex

Traders short can keep the stop loss at 20600. Cover short positions at 20273-19900. Sell on a fall below 19900 with the high of the week as stop loss or 20600, whichever is higher. Sell on rise to 20899-21133 with a stop loss of 20200

Nifty Weekly Pivot at 6022 is first support. Now 200DMA is at 5977. So the level is 5955-5977 is a Major Support. Below 5955 Bears can touch 5733-5622. On Weekly Chart Trend Line Support is at 5733. The long term trend line in the Monthly chart is now at 5622.

Stock Trading Tips



Energy Weekly Technical Outlook and Commodity Trading Tips

Crude oil for most active March expiry contract was little changed on a week on week basis as per the NYMEX markets are concerned. Prices fell during the earlier half of the week tracking the weaker than expected manufacturing data in China, wherein the government backed PMI number came at 50.5 for January, just managing to stay above contraction territory. Concerns over demand from EM’s was later appended with the disappointing set of economic cues from US wherein the manufacturing PMI fell to near 51 mark it lowest levels since July, 2013. However, moderately better inventory number and probable anticipation of continuing demand in winter season drove the commodity higher to close little changed for the week.

In the Indian markets though we saw crude prices falling by 1.6 percent to trade near the Rs 6070 per barrel mark for most active February expiry. This week we saw Rupee appreciating by nearly 0.6percent which took some bit of negativism for the commodity while we believe the other part of losses could be an adjustment out of overall movement in Rupee along with WTI and MCX over the last four weeks. In last four weeks, WTI gained by 4.8% whereas MCX Crude advanced 5.5 percent and the Spot Rupee depreciated by 0.6 percent almost completely adjusting the movement.

Coming back to major commodity specific updates last week, the industry backed American Petroleum Institute (API) late Tuesday showed crude stocks rose for the week ended 31st January though stocks at Cushing, i.e. the delivery point for WTI and distillates both fell by around 1.5 million barrels. Later the more important US Department of Energy (DoE) in its separate report said crude inventories same week gained by 440,000 barrels to 358.1 million. Rise in inventory was lower than the average expectations of around 2.5 million barrels meanwhile stocks for distillate which includes heating oil and diesel continued their drop. Distillate inventories slipped by 2.36 million barrels to 113.8 million in the last week whereas the implied demand for the commodity increased by an average 6% to 3.99 million barrels a day over the last four weeks.

DoE also said Cushing stocks falling by 1.55 million barrels to 40.3 million. Crude inventory at Cushing fell especially as the southern leg of Keystone XL pipeline started between Cushing, Oklahoma to the gulf coast. As also updated earlier, the pipeline is predictable headed for deliver 300,000 barrels of crude a day to the Houston area, sooner than ramping up to 520,000 barrels prior to the end of the year.

In other cues regarding the commodity, the intra-commodity spread between the two most traded contracts at the WTI came down on a week on week basis. The backwardation between March and April contract closed at 78 cents last week and has been coming down since then. As per latest update it stands near 40 cents. We saw the backwardation reducing for almost each day of the current week depicting reduction in supply tightness into the commodity. As per a general rule, crude sees two rounds of consumption periods; one between November and first half of December while the second round of winter wave which hangs in and around second half of January to early February produce better demand for the commodity. This year due to the winter being more intense, we are seeing the demand still continuing for the commodity. However there is one segment in the investment community which is already counting on gradual decline in winter wherein the distillate demand will gradually start falling and should lead to drop in WTI prices in coming weeks. Waning demand can also be seen from the movement in the calendar spread between the March and April, while acknowledged beyond

If one looks at the PVO side for the March contract at NYMEX, volumes till evening session Friday (IST) and OI as of latest available number from Bloomberg show volumes fell by near 8.5% on a weekly basis. The OI also came down by 11 percent with the commodity prices were little changed on week on week basis. While looking at the scenario for last few weeks, we feel traders are not willing to hold open positions particularly on the long side; remember crude had a near 3.5 percent run in last four weeks till 31st January, 2014. While a perfect case for selling has not been developed till now, looking at above cues particularly waning winter demand for the commodity in coming weeks, there is a high probability of prices to drop next week. The other economic specific data points from either side of Atlantic are also not at help against any major rally in the commodity. Cumulatively, we recommend a selling into in Crude on pull-backs for the next week

Crude Mcx February as seen in the weekly chart opened above has the week at 6151 levels originally moved lower, but has very good support of 6048 levels. Afterward prices rallied sharply towards 6182 levels and finally closed marginally lower from the previous week closing levels. For the coming week we anticipate Crude prices to find support in the range of 6130 –6110 levels. Trading without fail below 6090 levels would lead towards the strong support at 6049 levels and then finally towards the major support at 5980 levels. Resistance is now pragmatic in the range of 6280-6300 levels. Trading without fail above 6310 levels would lead towards the strong resistance at 6382 levels, and then in conclusion towards the Major resistance at 6440 levels.

Trend: Up

Major Resistance on Upside at 6294-6382

Major Support on Downside at 6127-6049

Natural Gas Mcx February as seen in the weekly chart has opened the above week at 302.80 levels initially moved sharply higher breaking both the resistance levels, but to finish found very good resistance at 359.40 levels. Anon prices fell sharply towards 295.60 levels and finally closed a little bit lower from the previous week closing levels. For the coming week we suppose Natural Gas prices to find support in the range of 285 –283 levels. Trading without fail below 280 levels would lead towards the strong support at 254 levels and then to end with towards the major support at 245 levels. Resistance is now pragmatic in the range of 318-320 levels. Trading without fail above 325 levels would lead towards the strong resistance at 341 levels, and then to conclude towards the Major resistance at 382 levels.

Trend: Down

Major Resistance on Upside at 318-341

Major Support on Downside at 284.50-254

Commodity Trading Tips

SELL CRUDE OIL MCX FEB BETWEEN 6135-6145 SL 6240 TGT 6000-6950



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.

Seven Days Bullion and Energy Run

Gold Commodity we are still not intending to change our enduring bearish stance while we believe in the next week gold price performance may remain lackluster. In one hand most of the global markets would remain closed, especially on 1st of January 2014 on the eve of New Year while trade participation may also be low in the next week. There are two perspectives we wish to cite here on gold trading in the next week. A) Ever since Fed declared tapering of its bond purchase programme most of the riskier assets such as equities are surging dramatically higher weighing on gold to remain lower. We believe so soon the trend may not change and gold prices may continue to remain lower. B) The investment demand is expected to be further lower in the western countries which is likely to keep prices under pressure. Also, the trading participation may continue to be dull in the next week. So overall, we believe gold prices may continue to drop in the next week. Looking at the economic data, we have a few from the US which are mostly likely to be supportive for the US dollar in turn that could bring gold prices further down. The detailed economic data are explained in our weekly economic analysis report. Likewise, if we talk about euro currency performance, it has been highly diverged to gold price performance. However, any change in the euro currency may have least impact on gold. Nonetheless, we carry a marginally bearish view on euro in the next week which may have a meandering impact on gold prices. So overall, we expect gold prices at the global market to remain lower while we do not expect any huge movement to take place. Looking at the domestic market, the performance may also stay jittery but losses could extend due to Indian rupee appreciation.

Silver Commodity may continue to outperform gold in the next week too. As discussed, as long as global equities continue to trade higher and some of the base metals to trade strong silver may remain higher. Therefore, we hold a positive outlook on silver. However, the overall bearish trend on silver has yet not been changed so price gains could be minimal. As also explained in our weekly global economic research report and in the gold section there are a few data expected from the US and Europe and likely that some of the data from the US in the form of housing number could bring in volatility on silver prices. In a different background we also wish to narrate that any surprises in gold performance on a bearish note then potential gains in silver could also be muted. So, we believe silver prices might either remain in a subdued trend or after an initial price gain it may eventually trade down. Looking at such scenario we suggest being cautious while trading in silver as part of positional trade whiles it could be a preferred commodity for intraday trade. Lastly, we also suggest making a ratio strategy on gold and silver in the next week where in we recommend selling in the former and buying the latter. The gold and silver ratio had moved down sharply in the last week from 62.37 to 60.85 which is also expected to remain close to 60

Crude Commodity will be amongst other updations for the commodity from the global space; tensions once again broke in the Middle-east and African region. There are reports of violence in South Sudan where the unrest between government and rebel groups has probable lead to losses in oil supplies of upto 200,000 barrels per day (BPD). Separately, in Libya oil production is running at a mere 250,000 BPD jus t10% of near 1.5 MBPD of oil which was being pumped into the country during t middle of this year.

However, as the issues have been revolving into these states for quite some time now, particularly in Libya there was no major impact on the global oil markets. In-fact, the Brent marginally underperformed the WTI this week with gains of just 0.1% to $111.90 per barrel as per latest available quote. The spread between the two contracts stood near $12 per barrel and has hovered around the similar range for last three weeks now. We don’t expect any major movement as per the spread is concerned in the next week. Amidst, Christmas and ahead of New Year celebration, international markets were into a holiday mood last week which pressed the trading volumes to multi-month low. Last week we witnessed, trading volumes at the both NYMEX and ICE for WTI and Brent contracts both fell by over 70% last week clearly a sign of lesser participation though the Open interest was little changed as traders held their open long-short positions intact. We could see moderate improvement in volumes next week however they are likely to remain below the average level.

On the economic data perspective we again have less number of economic readings from either side of the Atlantic though most markets in the global arena would be having truncated week due to New Year Holiday. While larger part of economic cues are likely to remain on the positive side particularly the manufacturing related numbers in the US we don’t feel they would hold so much of fire-power as to drive prices strongly higher. Detailed analysis of our economic outlook is provided in our weekly economy report.

On the other side we continue to hold a moderate bullish stance on the weekly crude inventory front in the US, particularly as we move on to our base case of winter season being approaching in the country towards its peak in January. We are advising traders to watch for dips to go long in the commodity for small targets in the coming week.

Commodity Tips


SELL GOLD MCX FEB ON RISE NEAR 28700-28800 SL 29100 TGT 28250

SELL SILVER MCX MAR ON RISE NEAR 45300-45350 SL 46300 TGT 44100-43600

Bullion and Energy Weekly Outlook and Commodity Tips

As of 6 PM IST spot gold traded down at $1197 down by 3.30% from its previous week’s close. Likewise, Indian gold prices too traded down at Rs. 28,430 down by 3.42%. There is a slight divergence in gold price performance in the two platforms as locally Indian rupee appreciated a tad against the US dollar. We would not cite any other reasons for price fall in gold except that it declined majorly due to gains noticed in the US dollar post Fed took a stance on cutting down its bond purchase programme from $85 to $75 billion US dollar. We believe bullion market was mostly hit from this event. In fact other precious metals group (PGM) also declined. Interestingly when US dollar surged euro currency too declined along with gold which eventually developed a better correlation between gold and euro. Meanwhile, the economic releases coming out from the US were also very striking, naming a few would be the better than expected housing numbers prompted gold prices to fall. If we look at the participation rate on gold in the global futures market volumes have increased substantially in the last week along with moderately increase in the open interest with fall in prices suggesting the weakness may continue to prevail in the market. From the investment front holdings at the world’s largest ETF the SPDR backed by gold remained lower at 808.72 tons down by 2.28%. This has been a continuous event in the westerns that the investment demand in gold continues to be lower. During the last few months we had seen slight improvement in the gold prices especially during seasonal demand from India and China however, that factor has been also faded now. So, globally gold demand is low and likely that weakness may continue in the market for at least short term. Along with Fed’s tapering story has also provoked more selling in gold. We believe gold prices may remain lower in the next week too. However, for the next week we wish to develop two stances on gold. A) Either gold price may continue to plunge sharply by breaking the previous low of $1179 and head towards $1160 supported by weak fundamentals and rising US dollar. B) The price performance of gold could be lackluster ahead of year ending. In the next week 24th is expected to be an early market closing in the US while 25th would remain closed across the globe so participation may remain subdued. Overall, we hold a bearish view on gold for the next week. As far as local gold prices are concerned we recommend remaining in sell side while rupee could bring in slight vulnerability in the market or the losses could be minimal


As of 7 PM IST spot silver is seen trading at $19.40 down by 0.95% from its previous week’s close. Likewise, at the domestic market silver prices too traded down and while writing this report silver is seen trading at Rs. 44,065 per Kg down by 1.6%. Like gold silver prices too corrected down due to appreciation in the US dollar however, fall was bit lower for silver as the global equities except China remained higher and the base metals traded mixed. As discussed in the gold section silver prices along with other precious metals were mostly down due to Fed’s tapering decision. Meanwhile, the overall trend has been bearish for silver so we believe it may continue to weigh on the prices in the next week. However, ahead of year ending close and Christmas holiday possibly markets may remain subdued so the volumes could also be thin. Hence, we though adopting a sell view but profit potential could be minimal.


There are no major cues expected from euro zone in the next week and a few economic data are expected from the US and durable goods order data could be important. Overall the trend in the commodity which usually is a high beta one got support from the mixed to positive closing in the base metals side. This was the factor which helped the whitish precious metal to be marginally better than gold, against its normal movement. Nonetheless, the broader direction in commodity is continuously derived from the movement in the latter. We feel, Silver take minor cues from weakness Asian equities especially china which particularly on Friday plunged over 5% amidst fresh concerns of tight liquidity. There is a higher possibly of silver prices continuing to trade down in the next week and we might also see it to again under-perform the yellow metal.


Crude oil for most active February expiry traded on a bullish note for larger part of the week and currently is hovering near the $99 per barrel mark. Oil prices inched higher as markets took positivity out of the US Fed monetary policy while broadly the US weekly crude inventory data continued to fill-in optimism about the overall demand pattern in the country. In the Indian markets, Crude oil for most active January expiry at the MCX were standing at Rs 6194 per barrel (Friday evening IST), higher by nearly 1.75% for the week. Marginally lower performance on the domestic front was due to the small appreciation in the Indian Rupee against the US Dollar.

On Tuesday late night, post the closure of our markets the US Private sector major, API (American Petroleum Institute) came-in with the inventory report wherein the agency said crude stocks fell 2.5 million barrels for the week ended 13th December while added optimism was provided by the product related stocks wherein both stood lower than anticipated. Later the more important report was published by the US DoE (Department of Energy) which showed crude inventories slipped 2.9 million barrels while some cushion came from the distillate stocks which dipped more than 2 million barrels. Though the gasoline stocks advanced, this negativism was further over-took by the fall in stocks at Cushing, the delivery point for WTI. We continue to maintain our moderate bullish bias with regards to the inventory scenario in the US in coming weeks. As the winter season continues to increase, demand for distillate and other related fuels would continue to rise and indirectly add to crude oil consumption.

In other commodity specific cues during the latter half of the week, the US based API came out with its monthly energy tale, wherever the agency said that fuel consumption in the country increased in November to its highest level for this month in the last 6 years. The entire deliveries of petroleum yield rise 4.9% Y/Y to 19.4 MBPD. On a YTD scenario, the fuel consumption averaged 18.7 MBPD higher by 1.7% from 2012.

Amongst the major updations on the economy and monetary policy front last week, the US Fed announced to reduce its stimulus programme by $10 Billion from $85 billion to $75 Billion. Though the trimming down of the bond purchase program is an indication that slowly and steadily markets could see lower liquidity; it still infused positivity amongst the broader asset classes as this shows the confidence of the US Fed on the economy.

Next week, we have few economic cues to be watched from the US and Europe. From the US, broader numbers of consumer confidence, spending and income along with the manufacturing and housing sector related cues are likely to continue build up confidence into the economy and should support oil prices, at-least as per the trading direction is concerned. Detailed review and outlook over the global economy is provided in our weekly economy report

For the broader markets, including crude oil the worry would be the truncated part wherein we have Christmas holiday and also early closing would be observed on 24th. Also this being the last week ahead of the New Year, we could see higher than normal volatility amongst markets with lower participation. While the overall trading bias into the Commodity continued to be on the bullish side, we recommend traders to tread caution while trading next week

Commodity Tips

Gold Mcx Feb Sell On Rise near 28625-28650 sl 29000 Tgt 28250-28000

Crude Oil Mcx Jan Buy on Dips near 6140-6120 sl 6030 Tgt 6250-6300

Gold Closes above 30840 on Closing Basis May Invalidate the Downside

Gold had made its weekly low of $1260.70. Gold prices that are seen falling since $1361 has continued to trade lower for the past three weeks. Market has been quite disturbed due to various global economic situations so the business participation is very low. We could see that the trading volumes are very thin at the COMEX platform. In the last week we had suggested a bearish view on gold citing major reasons as lower demand from the Asia while investment demand in the form of ETP’s and ETF’s have been low in the US. The gold holdings have been steady near 868.32 tons at the SPDR gold trust, the world’s largest gold ETF. Lastly, we wish to cite another reason for gold prices to rebound from the weekly low of $1260 could be the Wednesday’s comment by the Janet Yellen, the nominee for Fed new president on not tapering off the US stimulus program which eventually pulled dollar index to trade down. At the domestic market, December futures gold traded higher by more than Rs. 600. As of Friday the most active December contract is seen trading at Rs. 30350. We have seen a divergent performance of gold at the local market due to currency depreciation. The Indian rupee ended the week down by 1% at 63.11 per one US dollar. However, local demand continues to be low in India, post festive season.

As far as next week is concerned we need to develop a cautious approach on gold. As noticed in the past few months the demand and supply factors are insignificant in the market while economic events, central bank officials’ comments and the conventional economic data are driving the market. We believe there would not be any fresh demand coming in neither from the west nor from the Far East to push prices higher in the next week. However, we are hoping these factors to remain stable while globally gold investors’ may eye the US fed’s comment on the tapering off its stimulus program. Although there have been statements that unless economy recovers at a better pace tapering off the US stimulus program would not take place. In this regard gold the precious metals might surge as a safe haven appeal However, interestingly, though there are lots of discussions/comments seen in the market on tapering off stimulus program in the recent past but the impact is yet not visible on gold prices. This means the overall demand scenario on gold continues to be low. So, we are not suggesting any strong buy on gold for the next week. Meanwhile, the positive correlation between euro currency and gold has been quite disturbed for the past several months. However, we are holding up a bearish view on euro currency which might probably have a slight negative impact on the gold commodity.  Likewise, from the US we believe the data may provide a mixed outlook on the economy while Fed’s comment may keep US dollar index lower which might support the gold to trade on a mixed note. Globally, we believe gold commodity may though remain lower but volatility cannot be ruled out. At the domestic market, due to continuous Indian rupee depreciation gold prices might remain elevated. In our last week’s report we had expected though both MCX and COMEX gold prices to trade down but hinted that price fall in local market could be limited due to poor currency performance. So, we carry a divergence view on gold at MCX and COMEX platform

Silver Unlike gold that traded higher, silver continued to trade down .However, the performance of silver at the global market and the local market was slightly different due to local currency (Indian rupee) depreciation. Another reason for silver prices to trade down was the weak industrial metals performance. On an average base metals traded down by more than 1.50% in the last week supported silver prices to trade lower. Meanwhile, the US Fed’s comments on stimulus program are not disturbing much on the silver prices like it has been disturbing gold commodity. Therefore, gold and silver ratio moved sharply higher. We had suggested a ratio strategy in our last weekly report with a recommendation of buying gold and selling silver.

In the next week believe silver is expected to trade down supported by weak base metals performance. However, the crucial factor that could weigh on silver to trade down if global equities make a slight profit booking on their recent price surge. As we understand, globally gold investors’ are bit cautious about the Fed’s comment on its stimulus programme. By any means if any further comments are proposed on not tapering off quantitative easing then possibly silver might recover from its long weekly low. However, as of now we do not expect any turn around to notice on silver prices so possibly we hold a bearish stance on the same. The economic data from the US, Europe and Asia may have less impact on silver commodity in the next week. Overall, we believe silver commodity to trade lower in the next week. Hence, we continue to hold our previous week’s ratio strategy where in we recommend selling silver futures contract and buying gold contract. At the local market due to Indian rupee depreciation fall in silver prices could be limited. From the investment front the silver demand continues to be steady to slightly lower. Silver holdings at the I- shares, world’s largest ETF backed by Silver have declined from 348550 to 347250 million ounce. The detailed individual economic data are explained in our weekly economic report. Overall, we hold a bearish view on silver for the next week and recommend selling from higher levels.

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Sales of American Eagle Gold Coins

Gold futures for December delivery ended the week on a lower note at $1313 down by 2.92%. Likewise, at the domestic market the contract expiring in December settled the week at Rs. 2.95%. The gold performance in MCX and COMEX platform was mostly similar while the impact of Indian rupee was not visible in the last week as the rupee performance was minimal. We have seen huge fall in gold prices as its major counterpart the US dollar index rose and settled at 80.71. Gold traded lower in the last week as the economic data releases from the US were positive. Along with, the euro currency also tumbled the most which pulled gold prices to trade lower. From the investment front, ETF gold holdings at the SPDR gold trust declined by 6 MT to settle the week at 866.32 MT. Meanwhile, the physical demand that was noticed from the east, especially in India and China also halted for a while as the majority of buying was done by the mid period of October. Meanwhile, the broad based sell off in the entire commodity fraternity also supported gold prices to trade down. The Reuters’s CRB index declined in the last week from 282.56 to 274.96.

It is now evident that gold prices to remain down in the near term. Post the FOMC meeting and the dovish statement from the Chairman has changed the investors’ sentiment. In fact majority of fall was noticed during the last two days of the week and we believe market may continue to keep the bearish pressure intact on gold in the near term. In the other side, the euro currency is expected to remain lower. The economic data expected in the next week and the ECB’s effort to keep the economy boosted should definitely pull euro currency lower which may indirectly support the greenback to surge and therefore, gold commodity may continue to trade down. As explained about the economic data from the US, we believe mostly the releases to be mixed hence; there can be some amount volatility on gold prices. The CFTC report suggests the commercial shorts and the total short positions are more in the market in comparison to long positions on gold indicating price trend to remain bearish in the near term.

Lastly, the derivative analysis suggests the falls in prices are not so supported by the volume and open interest. Hence, we believe gold may continue to trade down and any fresh trigger might add more participation in the market which can increase the volume and open interest and eventually keep prices lower. Looking at the above analysis we believe gold may remain bearish in the next week and recommend selling from higher levels. At the domestic front, though gold future contract performance was mostly similar to global gold price but we believe in the next week the performance might diverge. Our in-house research suggests that the local currency the Indian rupee might depreciate a tad in the next week against the US dollar. However, we continue to hold a bearish view on gold.

Silver In the last week December futures silver prices traded down by more than 3.50% at the global market while locally prices settled down by 2% at Rs. 48,675. There was a slight divergence in the price performance due to local currency Indian rupee which appreciated a tad in the last week. Silver prices declined along with gold as a broad based sell off. As discussed in our gold section global commodity index, CRB also declined in the last week. As such there were no fundamental factors for silver prices to fall however, price correction over 3.50% was supported by the weak equities in the US and Europe while some of the Asians also ended on a negative note. Also, the base metal complex ended the week on a lower supported silver to trade down in the last week.

Since silver has underperformed gold in the last week the gold and silver ratio has advanced from 59.74 to 60.12.We believe the similar scenario hold in the near term. In the next week silver commodity is expected to trade down. Some of the global equities have posted a negative close and likely that market may top out in the near term which can help silver commodity to trade down. Besides, the equity market performance, the silver commodity demand from the west is very low. The ETF demand continues to be lower while in the last week it had remained stable at 350350 Troy ounces at the I-shares ETF. However, from the east demand is gradually likely to come to an end in the near futures. Silver which also takes cues from the industrial metal complex is expected to continue to take the bearish stance and remain lower in the next week. Although base metal complex is into a very mixed trend but select metals are bearish.

Overall, we hold a bearish view on silver in the next week. A few key factors are to be watched euro currency performance, development from the ECB, investor’s fresh mood on the US stimulus tapering story. Locally, in the next week silver prices might fall lesser than the global silver prices due to Indian rupee depreciation.

News Alert: Sales of American eagle gold coins by the U.S. Mint this year have exceed the total for all of 2012 as the futures market, which fall into a bear market in April, skull for the 1ST annual refuse since 2000.In 2013, 755,500 ounces of the coins were sell as on 1st November 2013, compared with 753,000 ounces previous year, according to information on the mint’s website. In the month of April, sales rush to 209,500 ounces, the most since December 2009, after futures posted the biggest 2-day slump in three decades

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Gold soared 3% in the previous week, settling at $1352.60 per Troy ounce while December futures, the  most  active  contract  at  the  domestic  markets  ended  at  Rs  30,710  per  10  grams.  Gold prices continue to trade higher, supported by a weak dollar and higher euro. Meanwhile, gold is rising, aided by the inherent demand seen from the eastern part of the globe, especially from India ahead of festive season. In India, physical gold is trading more than Rs  1000  premium  over  futures  per  10  grams  at  Rs  32,000.  Along with the demand from India, the government’s intervention on gold imports is also pushing gold prices higher. Likewise, China is also consuming a good amount of gold, supporting the up move in prices. However, from the western front, we are seeing a continuous sell-off in paper gold in the form of investment. In the last week, gold ETFs at the world’s largest gold trust, the SPDR showed a decline in gold holdings from 810 tons to 788 tons. Another interesting fact to note these days is that, the COMEX warehouse inventory of gold has nosedived sharply, suggesting a selling off of gold ETFs and ETPs by the western nations, causing Asia to take physical deliveries of gold.

Weak economic data from the west is also pushing gold prices higher.  In the last week, weaker-than-expected jobs data from the US supported gold to trade higher. In the meanwhile, European data is coming in moderately better, supporting  the  euro  to  trade  higher,  the  impact  of  which  is  seen  in  gold.  Likewise,  there  has  been  good  demand coming  from  India,  supporting  higher  trade  in  gold  prices.  As  far  as  next  week  is  concerned,  we  believe  that  gold prices will trade higher. Due to Diwali, a major festival in India, gold prices might continue to trade higher. However, gold might also trade highly volatile in the next week ahead of a huge number of economic data expected from the US, Europe and Asia. Especially, the US data are likely to be crucial and among them, the FOMC rate decision is likely to be important and might keep the dollar volatile, impacting gold.


1)  We believe that gold may trade higher in the next week while volatility could be higher. We recommend intraday trades only

2)  Globally, if the euro makes a high in the near-future, we shall recommend booking all long positions in gold

3)  $1360 and $1375 are the crucial levels for the next week

4)    Domestically,  gold  is  expected  to  continue  its  bullish  trend  ahead  of  festival  demand  and  so,  physical premiums are going to rise further in the next week

Silver prices traded higher along with gold in the last week to settle at $22.52, up by 2.93% for the December delivery of COMEX, a division of NYMEX. Likewise, the December contract at the domestic market ended the week at Rs 49,707, up by 3.14%. We have witnessed a slight disparity in silver prices on the two exchanges as the rupee has depreciated against the dollar by 0.359%, settling the week at Rs 61.45 per dollar. Silver prices have surged along with gold due to a lower dollar and appreciating euro.  Besides, there is good demand from India ahead of the festive season, pushing precious metals higher and so, silver prices have also surged higher. The base metals complex has also traded higher in the last week, with an average gain of 1% barring copper, which has also supported silver prices to trade higher. The investment demand, which is relatively better in silver than gold these days has surged in the last  week  by  1.30%  at  the  I-share  silver  trust,  which  also  pushed  silver  prices  higher.  In the last week, silver has outperformed gold.  Therefore,  the  gold-silver  ratio  has  increased  slightly  from  60.054  to  60.057. Another important point that we have noticed this week is that Asian equities have underperformed the rest in the world. In the last week, Asian equities have ended on a negative note while the US and European equities ended higher, supporting higher trade in silver. We could have seen more gains in silver prices if the Asian equities were also on a positive note.  As far as next week  is  concerned,  there  are  many  economic  releases  expected  from  across  the  globe.  Since  there  has  not  been  any change in silver’s fundamentals, the market may take cues from the economic releases. We believe that the US data may turn negative as most of them are October and September figures, while the upcoming FOMC meet would be crucial for all the financial asset classes, including silver.  We  believe  that  in  the  FOMC  meet,  the  Fed  Is  expected  to  discuss extending  the  tapering,  which  may  keep  the  dollar  subdued,  because  of  which  silver  might  get  an  additional  boost. Likewise, we have few data from Europe, which are likely to portray a mixed to positive outlook on the economy. From Asia,  we  have  the  monetary  policy  of  India,  which  is  likely  to  provide  a  positive  stance  on  the  rupee  and  therefore, Indian silver prices might underperform global silver prices. However, due to the festive demand, we believe that Indian physical silver may continue to remain in a premium over the futures. Overall, we believe that silver prices will remain higher in the next week, while it may remain vulnerable towards the end of the week.

Base metals saw volatile trading this week, with barring copper which ended the week on a marginally negative note the  rest  of  the  pack  managed  to  close  with  healthy  gains  of  over  1.7%  on  average.  Optimism in the metals complex was backed by expectations that the Fed would not start to taper its asset purchase program in the near – term, along with mixed to positive corporate earnings in the US. A weaker dollar and stronger euro also aided the broader gains in metals   while there were few but important economic cues from China which further supported optimism. By the end of the week, Nickel was the major gainer,  with  a  2.4%  increase  and  prices  closing  at  $1 4580/MT  at  the  LME  trading  platform.  Amongst the other industrial metals, lead was the second biggest gainer, with gains of over 1.5%. Zinc and Aluminum for the 3M forward contract at LME gained by 1.3% and 1.7% respectively. Copper was the alone under performer compared to its peers as the commodity took negative cues from the prevailing credit crunch in the world’s second largest economy, with the write – off on bad loans more than tripled by major Chinese banks. At  the  MCX  markets  in  India,  gains  in  the  metals  complex  for  the  October  expiry  were  more  or  less  in-line  with  the  price movement at the LME  amidst  a  marginal depreciation in  the  rupee against  the Dollar. During the coming week, we could see high volatility in the prices as we have major economic readings from US and Asia.  Amongst the important indicators for the base metals pack, we have US industrial production, pending home sales followed by important ADP unemployment and the crucial FOMC rate decision on Wednesday.  This would be followed by the critical ISM manufacturing PMI and   jobless claims data. We remain cautiously bearish on the data post the reopening of the US government. There are other important economic readings from the EU and the Asian region. We recommend that traders check the detailed economic review and outlook for the coming week in our Weekly Economic Report. Coming to  Asia, last week  we  saw the Chinese Manufacturing PMI  number increasing, which came in better- than -expectations  and  aided the optimism in the metals basket. The durable  goods  orders were  also  released  which  had  a  positive  impact  on  mainly  aluminum,  due  to  the  growth  in  transportation  and  aviation segment. In the coming week, we maintain our bullish stance on lead. The commodity is outperforming its peers, backed by the fact  that  the  battery  metal  has  remained  in  a  demand- deficit  from  the  beginning  of  the  year  till  August.  The deficit figure stands  at  around  234,000  tons  till  August  and   we  expect  the  supply  side  constraints  to  continue  over  medium-term.  We continue  to  maintain  our  bearish  view  on  copper  for  the  coming  week,  as  the  metal  has  fallen  into  supply  surplus  and  is currently  standing  around  150,000  tons  for  the  month  of  July  according  to  the  ICSG.  We believe that the supply surplus situation will continue till the end of this year. Nickel extended its gain from the previous week and took positive cues from the Indonesian government’s policy to ban exports of nickel ore. However, on the inventory front, nickel stocks continue to hover around the 230,000 MT mark. We maintain a cautious ly positive outlook on the commodity for the week. Amongst others, we maintain a ranged view on aluminum. We feel that even though the positive price performance on the back of an increase in aluminum exports from Japan, the commodity might remain under pressure due to a supply surplus.

Global equity markets depicted a mixed picture during the week with the MSCI Asia trading mostly positive for the week though closed sharply in the red. In developed economies MSCI USA and MSCI Europe ended the week on a marginally positive note  taking bullish  cues  that  the  US  Fed  would  not  taper  in  the  near  term .  US  equities  closed  in  the  green  for  the  week,  in   spite  of  negative economic  data  on  expectations  that the Fed would  not start tapering its bond – buying program  which  was supported by  mixed to positive corporate  earnings reports.    European equities traded higher for the first half of the week   however, they pared their gains towards the end of the week due to weak PMI numbers from the Euro -zone and negative IFO numbers from Germany. Most of the commodities including  bullion and base metals closed in  the green on the back of expectations  on  continuation of  loose monetary policy  in  the  US  whereas  a  weaker  dollar  further  supported  the  upside  in  the  above -mentioned  commodity  segment.  However, energy closed in the red for the week mainly due to negative weekly inventory data from the US. Last week, we saw host of major economic releases from the US which were earlier postponed due to the government shut down. Most of the economic data like jobless claims, non -farm payrolls and existing home sales were negative, which weighed on the dollar index. From the euro -zone, important readings such as the PMI numbers and consumer confidence came in negative.  PMI data and IFO numbers from Germany also declined. Overall, the economic data from the euro-zone was on a weaker note, which should have had a slightly negative impact on the euro. Though, the shared currency closed positively for the week as it took strength out of weak dollar. In  Asia,  China’s  manufacturing  PMI  increased  at  a  decent  pace  while  Japanese  industrial  activity  also  increased,  which supported the yen.

How Gold and Silver Reacts This Week

Gold  bullion  traded  down  by  3.18%  in  the  last  week  to  settle  at  $1268.20.  At the domestic market, December futures for the current contract ended at Rs 28,365, down by 2.50%. Although the rupee traded on a stronger note by 0.60% and settled at 61.08 per dollar, the effect of the currency appreciation was not visible on local gold prices.  As  of  11th  October  2013,  spot  prices  at  the  local  market  for  10  grams  were quoted at Rs 29,832, down by a mere 1-1.5% from its previous week’s close unlike the futures contract price performance. The primary reason for gold prices trading down in the last week was the US government’s flimsy  decision  on  the  debt  ceiling,  which  continued  to  weigh  on  all  the  financial  asset  classes  as  well  as gold.  Even  after  11  days,  the  US  is  still  facing  a  partial  shutdown  but,  there  have  not  been  any  complete developments yet and, investors across the globe are reluctant to trade. Therefore, the trade participation have also come down. From the derivatives market, gold futures, which fell over 3% in the last week was less supported by the volume. The aggregate trade volumes were down by 30% from its previous week’s trading volume. However, there has been a slight recovery in the aggregate open interests as the same was trading below a 4-year average. This indicates that the market had now embraced the bearish view on gold and, it is likely that in the near term that gold bullion will drop. At the local futures market, prices along with volumes and open interests have increased, suggesting that the market will remain lower in the next week. The  real  investment  demand  has  also  declined  as  investors  are  still  cautious  in  trading  gold.  The gold holdings  at  the  SPDR  ETF  have  declined  to  890.98  tons  from  899.99  tons.  We believe that as long as the uncertainties prevail in the market, the investment demand may also remain lower and by which prices may also remain lower. Gold is heading for the first annual loss since 2000 and the biggest decline since 1981, as some investors lost faith in the precious metal as a store of value amid concern that the Fed may slow the pace of its $85 billion monthly bond purchases in the near future. Coming to the most discussed topic, the partial shutdown of US may continue to be a concern  in the next week and still there is clarity on the debt ceiling decision because of which the market remain panicked and commodities prices, especially gold may remain  lower.  In  the  meanwhile,  the  economic  data  from  across  the  globe  are  looking  negative. To  begin with,  the  US  economic  data  may  show  slight  negativity  along  with  European  data  while  Asian  economic releases may remain mixed. However, we believe that the European economic data might turn more bearish than other economic numbers in the next week and because of which the euro, which is holding up near $1.3550 might decline. This might keep gold prices lower. At the domestic front, the rupee may continue to appreciate, which will further help local gold prices trade down. Looking at the above scenario, we believe that gold bullion may continue to trade down in the next week while we recommend selling from the higher levels.

This Week Strategy:

1)  Stay short in the futures contract at the MCX and COMEX platforms

2)  Calendar spread at MCX platform: Buy near month and sell far month

Silver prices traded down last week. December silver futures prices at the COMEX platform traded down by more than 2% and settled at $21.25. Likewise, at the local market, the silver futures contract has declined by more than 3%.  Unlike  gold,  silver  prices  have  respected  the  local  currency’s  appreciation  and  therefore, Indian silver prices have fallen more than global silver prices. As stated in our economic analysis and in the gold report, silver prices fell due to ongoing concerns looming in the US economy. In the meanwhile, silver prices also declined, supported by the weakness in the entire precious metals group, barring palladium. The investment demand has also declined in silver. The holdings at the I-share ETF backed by silver have declined from 344450 to 350450 tons.  The  month-till-date  silver  holdings  have  been  in  the  negative  by  1.13%, indicating that the demand is still low in the global silver market. Another important aspect that we have noticed is the gold and silver price performance, which is currently divergent and likely to continue in the same vein. Therefore, we also suggest a ratio trading strategy. In the last week, silver outperformed gold as the former declined less than the latter, supported by the higher equity indices across the globe. We expect the scenario to remain the same in the next week and because of which the fall in silver prices could be minimal. At the domestic market, silver dropped to a nearly two-month low to retrace Rs 48,000 per kg on a huge selloff and no demand at the physical market. Since gold imports are restricted in India by the government, there has been good import for Silver. Indian silver imports are at a record high so far this year as the prices are trading low. Fact: According to the GFMS metals consultancy, India imported 4,073 tons of silver from January to August, more than double the 1,921 tons in the whole of 2012, when a jump in prices in the peak season hurt demand. The record high was 5,048 tons in 2008.Finally, as discussed in detail about the economic data in our global economic analysis; we believe that the industrial activities are likely to be less impressive for the respective economies and by which silver prices might remain under pressure.  In  the  meanwhile,  the  rise  in  equity  markets  across  the  globe  and  slight improvement in base metals might also restrict the fall in silver prices. Looking  at  the  overall  scenario,  we  expect  silver  prices  to  remain  lower.  However, the fall in silver prices could be minimal in comparison to the gold.

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