Gold Enters Bullish Territory
After a steep 2.4 percent decline on Thursday in global markets on massive sell-offs, gold entered into bullish territory on Friday, following the statement by the Federal Open Market Committee (FOMC) reiterating “to remain patient in the beginning to normalize its stance on monetary policy.”
FOMC’s stance indicates that the prospects of interest rate increase will take longer than previously estimated.
Standard gold jumped over 1 percent in the popular Zaveri Bazaar here on Saturday after smart recovery in global markets. Gold gained Rs 300 ($4.8) to close at Rs 28,200 ($454) per 10 gms on Saturday. “Both technically and fundamentally, we see not much of downside in gold. The yellow metal could be volatile, but its downside is limited. Hence, gold can easily surpass the psychological barrier of $1,300 an oz to hit $1,325 an oz in near term.
Development in Greece, however, holds the key. Any bad news may take gold even higher,” said Gnanasekar Thiagarajan, Director, Commtrendz Research.
The yellow metal after hitting the low of $1,251 an oz, clearly below the 200-day moving average level of $1,253 an oz, rebounded on Friday to close at $1,284.1 an oz in London.
“Despite a furious rally Friday, gold settled with +3 percent its first monthly gain for 2015, earlier this week prices reacted to the FOMC’s first policy meeting of the year and met with heavy selling also physical gold in Asia market are remained muted.
But slow and steady trend is turning up for gold as currency market turbulence, energy groups in US announced to reduce investment programs because of falling oil prices which can axe the rate hike speculations. Also, Central Bank adding reserves all this can drag the prices once again near to $1,370-$1,380 again, while on domestic side prices can trade in the range of Rs.25,500 - 29,500 per 10,gms,” said Ajay Kedia, managing director, Kedia Commodity,Commtrade.
Silver followed suit and ended the week with a moderate gain of $0.03 to $17.28 an oz on Friday.
“Silver is a plain catch of gold. Eventually silver should perform much better than gold being the second fiddle. Lots of fundamentals are supporting a big rally in silver which will take some time, though,” said Thiagarajan.
“With high volatility in bullion prices, traders have adopted a revamped strategy. On every fall, they buy some quantity to sell on rise, unlike ‘one way buying or selling move’ and ‘wait and watch’ after first execution, they used to practice earlier. So, even volatility offers some returns for investors today,” said Kumar Jain, Director, Umedmal Tilokchand Zaveri, a city based bullion dealer.
Supporting the move, the global consultancy, GFMS forecasts bullish long term fundamentals for gold. As well as the knock-on benefits of lower oil prices there are inflationary forces on the long-term horizon (energy only contributes 8 percent to US consumers’ price index) as a result of the massive liquidity in the system. This year will see the nadir of the gold price, GFMS said.
The clear knock-on effect was stifled physical demand in 2014, compounded by limited expectations of a price recovery; and continued resistance to gold in the professional fraternity.
Asian investors exhibited something of a paradigm shift in purchasing attitudes in 2014 partly as a result of 2013 activity, price-responsive physical investors around the world confounded expectations of suppliers in 2014. The much-vaunted $1,200 target level, expected to trigger pent-up demand, passed by almost unnoticed as would-be buyers stood aside as prices slumped, awaiting stability and a sign of an upturn.