Gold prices came under pressure yesterday after witnessing a record high of $1814/oz in the international markets as increase in margin requirements by the CME coupled with re-emergence of positive global market sentiments led to reduced demand for the metal as a safe-haven investment.
Spot Gold and Spot Silver prices declined 1.6 percent in yesterday’s trade as market sentiments improved. The Dow Jones and the S&P 500 Index which had declined sharply in the last few trading sessions witnessed a bounce back in yesterday’s trade and closed a whopping 4 percent higher.
Upbeat economic data from the US came in as a positive surprise for the global markets yesterday amid weakening sentiments.
Data indicated that jobless claims decreased by 7,000 to 395,000 for the week ending 6thAugust, marking the lowest since April 2011, from the previous figure of 402,000. This factor too depressed demand for gold and silver which are considered as safe assets during economic uncertainty.
Global central bankers have showed their concern over the current financial crisis and have promised a solution to the same. The Group of Seven conference which was held of August 7th has indicated that global policymakers will not watch the financial market situation to deteriorate further. In the latest FOMC meet the US Federal Reserve announced its decision to keep interest rates in the near-zero range until mid-2013 in order to bolster economic growth in the world’s largest economy.
The European Central Bank (ECB) intervened in the bond markets and the Bank of England (BOE) also indicated that it is ready to add more stimulus if required. Japan and Switzerland have both stepped up efforts to cap appreciation in the currencies Yen and the Swiss Franc. The steps taken by central bankers at this point in time are crucial and are acting as a collective support for the global markets to recover.
A major step taken by the European countries includes a ban on short-selling of financial stocks starting August 12th in a step to protect their banks and also bring stability in the markets. The European Securities and Markets Authority said that Belgium, France, Italy and Spain will temporarily ban short-selling. This factor is also negative for gold prices in the near-term as stable global financial markets will reduce safe-haven demand although the short-term and long-term trend in gold remains up.
Outlook
Gold and Silver prices are expected to remain under pressure today as global financial markets witness stability on account of positive jobless claims data from the US coupled with hopes that global policymakers will help ease concerns with their collective efforts, thus easing safe-haven demand. But the short-term fundamentals are bullish in the case of gold and silver as concerns with respect to the US and the Euro Zone debt situation remain and any negative news or development could act as a positive trigger to prices.
Courtesy: Angel Commodities
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