Gold moves up on global cues

Prices of standard gold increased 1.5 per cent in Zaveri Bazaar (in Mumbai) on Saturday following similar moves in global markets. Better-than-expected US job data removed doubts over interest rate hike as scheduled by the United States Federal Reserves (US Fed) later this month resulting in favourable trade sentiment towards bullion.

On Saturday, standard gold saw an increase of Rs 390 to close at Rs 25,765 per 10 gram. This resulted in the flight of buyers from the Street. Since a section of traders had urged the government to reduce interest rate from the existing 10 per cent to two per cent, consumers abstained from fresh buying amid expectations of a decline in prices.

In London, gold price jumped 2.32 per cent to settle at $1,086.84 (about Rs 72,436) an oz on Friday as compared to $1,062 (about 70,780) an oz the previous day on better-than-expected US job data. Gold for delivery in February 2016 on Comex division of the New York Mercantile Exchange was up to $1,062 an oz as against $1,068 (Rs 71,180) before the release of the data.

“With positive data, markets expect nothing worse now. Ideally, gold prices should have gone down with dollar getting stronger. But, gold price moved up due to short covering by traders. We expect gold price to remain firm and to touch $1,100 (about Rs 73,313) an oz and $1,125 (about Rs 74,979) an oz thereafter in short term before taking a downward move further,” said Gnanasekar Thiagarajan, director, Commtrendz Research.

The US economy added 211,000 jobs last month against 201,000 jobs with an employment rate remained unchanged at five per cent. For October, however, the US government revised employment number upwards to 298,000 from 271,000 announced earlier, making the normalisation of US monetary policy from the month’s FOMC meeting a near certainty.

The dollar responded positively and climbed 0.5 per cent to 1.0894 against the euro.

Silver also followed the trend and rose 3.12 per cent to close in London at $14.55 (about Rs 969.7) an oz on Friday as against $14.11 (about Rs 940.4) an oz the previous day. In local markets too, silver moved up 1.78 per cent to close at Rs 34,900 a kg on Saturday from the level of Rs 34,290 a kg on Friday.

“Positive employment data paves the way for an imminent interest rate hike by the US Fed on December 16, which would be positive for dollar and negative for gold. Since dollar is set to strengthen, the price decline in gold would hardly benefit Indian consumers being the rupee weakening against the dollar,” said an analyst.

In local currency, therefore, gold is set to touch Rs 26,000 per 10 grams once again in short term before falling to near recent bottom. Silver would also follow largely gold in India.