FOMC Meeting Can Spark Bullion

Gold soared 3% in the last 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 the 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.

This morning, gold prices at the COMEX platform are seen trading at $1350, mostly unchanged from the previous close. We believe that the market is merely waiting for fresh triggers. As far as today is concerned, we believe that the market may remain calm ahead of the FOMC meeting. However, the continued weakness in the US dollar may push gold prices higher. At the domestic market, gold prices might initially decline a little due to the rupee’s appreciation. However, we recommend buying from the lower levels for the day.

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.

As of this morning silver commodity is seen trading at $22.55 down by 0.35%. We believe silver is under performing gold today due to weakness noticed in base metals. Also, silver commodity is taking cues from the chinese equity markets. We believe as the day progresses silver may remain vulnerable and may swing between highs and lows. For the day we are not suggesting any trade idea on silver while recommend selling silver and buying gold as a part of ratio strategy.

TODAY STOCK MARKET TIPS

BUY CRUDE OIL MCX NOV ABOVE 6045 SL 6025 TGT 6080

BUY GOLD MCX DEC NEAR 30790 SL 30680 TGT 30900

ECONOMIC INDICATORS:

DATE TIME Region Indicator Period Survey Prior
28.10.2013 18:45 US Industrial Production MoM Sep 0.4% 0.4%
28.10.2013 18:45 US Capacity Utilization Sep 78.0% 77.8%
28.10.2013 19:30 US Pending Home Sales MoM Sep 0.0% -1.6%
28.10.2013 19:30 US Pending Home Sales YoY Sep 2.9%
28.10.2013 20:00 US Dallas Fed Manf. Utility Oct 12.8%
28.10.2013 11/02 US Monthly Budget Statement Sep $67.0B $75.2B
28.10.2013 11/02 US Leading Index Sep 0.6% 0.7%

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