Gold up 5% in three weeks, outlook cautious

Rebounds from three-and-a-half-year low to trade at $1,200 levels

Gold and silver prices have made a sharp recovery in the short term, rebounding from their three-and-a-half-year lows. Both metals are up over 5 per cent in just three weeks. However analysts are cautious at this level though there is a view that prices seems to have seen a bottom for the time being. In the near term, prices may see some improvement but may not hold there.

Gold closed $1,188.7 per ounce on December 19 which was lowest in three years and 5 months. From there price went up over 5 per cent and trading at $1,248 while silver went up 5.4 per cent from lows on bargain hunting.

On Friday prices further improved on lower growth in jobs in the US triggering demand for yellow metal. The trend could continue for some time at least.

Mirae Assets said in its outlook on gold, “Cost of production for gold is close to $1,200 from the new mines and for Silver at around 18$, hence the market may take support at those levels.” During the last six months gold took support around $1,200 twice. Even after falling below that it has seen a sudden rebound.

However, Kishore Narne, associate director head of commodities and currencies at Motilal Oswal expects gold on the domestic market to go up to Rs 29,500 per 10 grams on the MCX futures. Price closed Rs. 29,033 per 10 grams yestersay, today on the Mumbai spot market it rose by 0.5 per cent to Rs 29,925 per 10 grams.   

This will translate in to prices of around $1280 in the international market in near term. However that level will be  a strong resistance. Reena Rohit, chief manager, non agri commodities and currencies at the Angel commodities has a reason for this. She says that while gold was rising in last few weeks from low levels, there was no support of physical market as US’ biggest exchange traded fund SPDR has seen selling pressure even when gold fell to three and half year low in Dece,ber and when prices rebound fund has seen only outflows and in last three wekks when gold price went up 5 per cent SPDR fund has seen 2 per cent fall in holdings.

She said, “gold in the coming week is expected to be bearish as SPDR gold holdings continue to fall as well as the impact of US Fed tapering which started last month.”

in Mumbai spot market gold has not gained despite of the fact that internationally prices have seen improvement because of fall in rupee and balance got adjusted in increase in spot market premiums which keep on adjusting domestic prices and now allowing big rise or fall.