Flashback - Precious Metals 17th Oct, 2008

MAJOR HIGHLIGHTS

Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, reached a record 770.6 metric tons on Oct. 10. It fell to 767.6 tons yesterday.

U.S. stocks and the Reuters/Jefferies CRB Index of 19 raw materials fell for a third straight day.

US data to be released this evening include: Housing Starts, Building Permits & Michigan Sentiments

MARKET RECAP

Gold declined to a one-month low on speculation that investors will sell the precious metal to cover losses in other markets. Silver fell to the lowest since February 2006. Investor’s confidence is still very low and with equities markets witnessing a free fall in past week, long positions in gold is being liquidated to meet margin-calls. Crude prices have also collapsed from their all time highs and trading at 50% discount, which has also exerted pressure on gold prices.

In currency market, the Euro is in a consolidation phase after its free fall with Euro trading below its (200-Week Moving Average i.e. 1.3562). The dollar still reigns supreme and that pressure on gold is manifest. Gold is doing quite well in terms of other commodities and relative to global equity markets

Silver prices also witnessed a sharp fall during yesterday’s trading session to close below the $10 mark. Silver prices had breached its earlier bottom at $9.32 formed on 10th October 2008 to touch an intraday low of $9.21 yesterday.

OUTLOOK

With global equities & financial markets still in pain, those holding long positions in gold have been squaring off their positions over the past few days. Also, the dollar is still showing signs of strength on the back of weakness in Euro. Declining crude prices are also expected to weigh on gold prices in coming weeks. On the physical side, volatile gold prices appears to have blunted the buying appetite in India, the world's largest consumer, ahead of Diwali, the Hindu festival of lights, at the end of October. But at the same time, as prices correct further, we can expect good demand from the physical side.

On intraday basis, Spot Gold prices have immediate and crucial support at $795/$780 whereas resistance is seen at $817/$828. Spot Silver prices shall find support at $9.50/$9.20 whereas resistance is seen at $10.3/$10.70.

MCX December Gold has support at 12680/12500 whereas resistance is seen at 12895/13200 levels whereas MCX December Silver shall find support at 17500/17000 whereas resistance is seen at 17980/18350 levels.

Courtesy: Angel Commodities