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.