Gold price slips to 7-week low on global cues

Gold for delivery in October is currently quoted at Rs 27,260 per 10 g, a decline of 0.29% from its previous close

The price of gold on Wednesday fell to nearly a seven-week low in Zaveri Bazaar here, following a steep decline in global prices ahead of the release of key economic data, scheduled for Thursday. Standard gold reported a decline of around 0.54 per cent to Rs 27750 per 10 grammes, the lowest since June 13.

After hitting a 10-week low in overnight trade on Tuesday, gold for near-term delivery saw a mild recovery in the Comex division of the New York Mercantile Exchange early on Wednesday. After a steep slide of $22.25 in late trading on Tuesday, the yellow metal opened at $1,266.25 an oz. However, given a bearish sentiment for gold, as well as silver, the prices could move in a narrow range, likely come down, going forward.

“Gold and silver are likely to trade lower, as growth in the US economy will lead to a decline in investor interest in the precious metal. News and reports from Russia and Ukraine will continue to dominate the significance of gold in the overall commodities market, including the precious metal pack,” said Prathamesh Mallya, senior research analyst (non-agri commodities), Angel Broking.

Spot gold prices hit a two-and-a-half-month low on Wednesday after Ukraine said it had reached an agreement with Russian President Vladimir Putin on a “permanent ceasefire” in its eastern region. But it pared some of its losses after Russia clarified no such deal had been struck. Putin and Ukrainian leader Petro Poroshenko had agreed on steps towards establishing peace in eastern Ukraine, but a ceasefire had not been agreed upon between Moscow and Kiev.

On the MCX, gold for near-month delivery recovered marginally after trading lower by around 0.56 per cent in early trade. Gold for delivery in October is currently quoted at Rs 27,260 per 10 grammes, a decline of 0.29 per cent from its previous close. Spot silver prices are trading marginally higher, on cues from a positive movement in gold prices and trading at $19.16 an oz. A weakness in the dollar index and bargain buying at lower levels is supporting the prices. On the MCX, silver was trading 0.06 per cent lower at Rs 42,303 a kg.

Analysts believe crude oil prices would trade lower on profit booking at higher levels, as ample crude oil supplies, coupled with easing geopolitical tensions would lead to a correction. However, the latest US inventory reports from the US Energy Information Administration, due on Thursday, are expected to show that crude oil and refined fuel stocks dropped last week, potentially supporting prices.

“We expect base metal prices to trade lower, given concerns over Chinese demand. Also, fears of excess supply after news that Newmont Mining could resume exports of copper concentrate as early as next week would act as a negative factor. However, estimates of favourable factory orders data from the US will restrict sharp downside in prices,” Mallya said.

Noticing the downward sentiment, HSBC on Tuesday forecast gold to move in a range of $1,150 to $1,350 an oz during the rest of 2014, in a market “searching for a new equilibrium” with a number of offsetting factors. It maintained its 2014 average price forecast at $1,292 an oz and listed 2015 and 2016 forecasts of $1,310 and $1,345 an oz, respectively.