Gold and Silver Weekly Outlook and Commodity Tips

1
Gold and Silver Weekly Outlook and Commodity Tips
Gold Comex June future is seen trading at
1300, down by 1.40 from its previous
weeks close. Likewise, in the MCX Gold Commodity
platform the same contract traded down by 0.80
at Rs. 28,544. There is a slight divergence
between COMEX and MCX gold prices due to currency
depreciation. Indian rupee spot prices ended
the week at 60.33 down by 0.43 from its
previous close. Overall, the gold commodity
has been into a bearish leg for the past
several months and likely that the trend may
continue in the near term. However, in between we
saw a good amount of price recovery due to
continued geo-political tension between
Russia and Ukraine. Nonetheless, the other
fundamental factors are still suggesting
weakness in the commodity. From the investment
front, the SPDR gold trusts the largest ETF
backed by Gold has declined its holdings from
804 tons to 798 tons indicating investment
demand is still low. Meanwhile, poor
Chinese economy is driving physical
demand lower also pulling the commodity
lower. We believe as long as China
continues to remain under concern the gold
demand may remain muted and that should keep the
prices lower. The other market dynamics- rising
USD index and falling euro currency is also
driving gold lower .We believe the similar kind
of scenario may be noticed in the near future.
From the inventory front, at COMEX the stocks
have risen in the recent past suggesting that the
physical demand is lower and as long as stocks
continues to trade higher we could see gold
prices managing to trade below 1300 mark. The
equity market performing in green especially
the US indices is suggesting that the
global investors are reluctant in buying the
gold commodity as an investment asset. Looking at
the above scenario we believe that gold commodity
may remain lower in the near term. The risk
factors that are likely to keep the commodity
away from huge fall are the slight improvement
in the PPI/CPI numbers of US and Europe.
Also, the 10 year treasury yield is
managing at 2.64 indicating that the lower
yield could bring in slight demand for
the commodities. For the next week we hold a
bearish view on gold while we also believe that
by end of next week or early next there may be a
good bargain buying in gold from lower
levels Gold MCX June Commodity future prices saw
volatile movements in the last week, moving in
the range of Rs 28200-28986. As of 17
April, 2014 prices are trading at Rs
28526, down by 0.79 from the previous
weeks closing. Technical indicators like
the weekly exponential moving averages (8,13
21) and weekly relative strength index (14) are
both supportive of the
downside movements. For short term traders, we
suggest selling at the higher levels.
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Gold Weekly Trend Sideways Up Support at
28100-27400 Resistance at 29100-29500 Silver
followed the broader trend in the complex and as
of Thursday evening session (IST) we are seeing
May month contract at Comex is standing at 19.65
per ounce levels, lower by 1.6 for the week.
While we had a selling view in the
whitish precious metal as well, we also
suggested a Ratio strategy wherein we
recommended buying Gold and selling silver
with an anticipation that silver would
underperform gold and eventually increasing the
ratio. The same held correct wherein particularly
during the middle sessions of the week,
gold/silver ratio for Comex active contract
touched near 67 levels. Our negative stance on
the commodity was also build in by the fact that
we expected continued demand pressure coming
from Chinese markets, worlds largest
consumer of the commodity along with
expected increase in the USDX. While US
dollar moderately cut losses this week,
equities across the US and Europe performed well
and mainly US indices flied high. Negativism for
the sector was supported by positive set
of economic cues from the US mainly on
manufacturing related sector. While broader
factors for the commodity have not changed
much, we are holding our negative bias into
commodity for the next week too. As also stated
in previous week, underperformance in silver in a
week when base metals recorded smart returns
tells about the inherent weakness in the
commodity. In the current week, we saw decent
increase in the metals complex, despite which
silver saw higher fall as equated to gold. The
benchmark LMEX index for LME traded base metals
managed to hold near last weeks high mark after
around 2.5 uptick in immediately preceding week.
As investment related demand not being able
to provide any support to the commodity
and weakness in Gold anticipated continuing,
we feel silver too would continue to trade
on a weaker note and thus suggest selling the
commodity on pullbacks. In-fact we are also
holding our bullish view on the gold/silver ratio
albeit the pace of increase in ratio might not be
as high as been the case in previous few
weeks Silvers MCX May Commodity future prices
saw a downside fall in the last week. As of 17
April, 2014 prices are trading at Rs 42408, down
by 1.80 from the previous weeks close. Prices
are witnessing a strong resistance at Rs 43840,
which is expected to hold the downside view for
the week ahead. A break below Rs 41500
could confirm further weakness in the near
term. For short term traders, we suggest selling
at the higher levels. Silver Weekly Trend
Sideways Support at 42300-41200 Resistance at
44000-45500 Commodity Tips Sell Gold Mcx June
near 28650 sl 28970 Tgt 28400-28100
Sell Silver Mcx May near 42780 sl 43850 Tgt
41600-41000