Dallas Fed Manufacturing Activity Will Shed Bullion Commodity

Bullion Commodity recorded a broader ranged trade on Friday with moderate bullishness into the complex coming in despite the overall positive set of economic cues from the US. By the end of trade, Gold was higher by 0.15% to $1214 an ounce with the commodity also seeing decent gains on volumes as against lower participation in other days due to Christmas celebrations. In the Indian markets we saw gold for most active February expiry closing at Rs 28565 per 10/Gms, marginally in the red by 0.5% as our markets took note of modest appreciation in the Rupee overall for the week as a whole and particularly Friday.

Overall, the bearish trend on gold that is visible since the beginning of the year 2013 has been continuing and as of the latest data, gold is down by 27% from its previous year close. We could also cite another reason for gold prices continuing its fall as investors across the globe might have parked their funds in other markets especially in equities. We are seeing incessant rally in equity markets. In the meanwhile, whole commodity sector and the major bond yields are rising indicating investors are still reluctant to invest in gold and gold derivative markets. As stated above markets are very dull due to New Year, the trading participation have also come down. From the investment front, the world’s largest ETF backed by gold, the SPDR has declined its holdings by 0.20% to 803.50 tons.

In Intra-day already we are seeing gold prices trading lower by 0.5% levels in the Comex platform and we feel the similar trend could continue for larger part of the day. Movement however may remain dim. We recommend selling on pull-backs into the commodity for small target today

Silver Commodity prices had a pretty decent session last Friday wherein the commodity managed gains in the range of 0.65% to $20.05 per ounce. Silver for March expiry at Comex outperformed gold backed by moderately better performance at the base metals front. In the Indian context, we saw silver for same month’s settlement at MCX gain 0.85% to Rs 45150 per Kg, better gains despite marginal appreciation in the Rupee. For a whole week too, silver had healthy gains and finished up by nearly higher by 2.4% at Comex whereas in the domestic markets it jumped over 2.5%. Silver prices outperformed gold in the last week as it might have taken strong cues from higher global equities while base metals price performance also supported. Silver carries the credit of both precious and industrial metal and we believe it has mostly taken cues from the latter in the last week. Since the gold and silver prices performance has been diverged the ratio has also moved smartly. In the previous week gold/silver ratio was at 62.37 while it had declined to 60.85 in the last week. In an Intra-day basis though, we are once again seeing pressure building into silver and currently it is trading weaker by 0.9% at the Comex platform. Today, we would recommend a reverse strategy against our Friday’s view. We would advice traders to go short in Silver and buy Gold as part of inter-commodity play to benefit out of the movement into the two. On an individual basis too, as also said above, overall weakness in the bullion pack is likely to continue and we recommend selling from higher levels in the commodity

Commodity Tips

SELL GOLD MCX FEB ON RISE NEAR 28600 SL 28800 TGT 28400

COMMODITY MARKET EVENTS FOR DAY TRADING:

DATE TIME Region Event of the Day Period Survey Prior
30.12.13 20:30 US Pending Home Sales MoM Nov 1.00% -0.60%
30.12.13 20:30 US Pending Home Sales YoY Nov -0.20% -2.20%
30.12.13 21:00 US Dallas Fed Manf. Activity Dec 1.9
30.12.13 12/31 UK Nationwide House PX MoM Dec 0.70% 0.60%
30.12.13 12/31 UK Nation Wide House Px NSA YoY Dec 7.10% 6.50%