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