The week gone by, Gold resumed rally after report showed that the US employment unexpectedly stagnated in August, lifting demand for the haven asset. Gold futures rose 4.42% at the COMEX while the same at the MCX gained 1.05%.
The dollar index settled the week by gaining over a percent despite poor economic releases due to investors’ search for a refuge after the stock market fell at the week end
US stocks pared early gains as there were no jobs added by the private sector. World equities measured by the MSCI all country world indexes, posted a gain of 1.05% while the Asian benchmark index advanced by 3.20%. On the other hand, the CRB Index, a bellwether for commodities gained by 0.84%
Holdings in the SPDR Gold Trust, the world's largest goldbacked exchange-traded remained unchanged at 1232.31 tons as on 1st Sep
The gold-silver ratio increased to 43.98 from 43.79
OUTLOOK
While writing this report at 8.20 IST, Gold futures at the Globex are up by $7.00 ($1881.40). Asian stocks fell for a second day after the reports showed that the US job growth stagnated unexpectedly in the last month, raising concern for a further worsening of economic conditions. The dollar index headed for a winning spree amid concern that the Europe’s sovereign crisis will worsen. The Euro slid against the greenback after the German chancellor lost the election in her own home state added concern to bail outs for debt saddled European nations. The US market is closed today for the Labor Day holiday and so, thin volume is expected which will also be indicating a lesser volatility. In such economic conditions gold is likely to be demanded as haven. The ECB president is scheduled to speak in Paris today before the ECB’s policy meet this week, expecting the central bank to leave its benchmark rate unchanged.
However, due to inflationary pressure, if the ECB takes away the tightening measure, Euro will be losing the support. Speculation is also mounting that the Fed will provide stimulus after concern aggravated that the US economy is slowing. From the economic data front, the European PMI numbers are expected to remain weak while the Euro zone investors’ confidence is also likely to shatter due to the uncertain economic crisis. Hence, this may put little pressure on the metal and at the European session gold may retreat a bit.
Overall, gold is likely to remain strong although the weak euro may compel gold to have a little fall back. So, it is recommended to remain long for the metal at lower prices.
Courtesy: Karvy Commtrade Ltd.
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