Last Updated :
27 July 2009 at 17:30 IST
Higher risk appetite may decrease appeal for gold
LONDON (Commodity Online): Equity rally may reflect the global sentiments about economic recovery and the feeling that the worst may be over. Gold prices also rallied last week and traded between $940-960 levels.
However the uptrend seems to have settled for gold as beyond a point stock rally signifies increased risk appetite that weakens the yellow metal’s safe haven appeal. On the other hand increased risk appetite often benefits the energy and agri-commodities at the global level. This week too gold is expected to trade above $960 but still below the $1000 mark while the picture looks positive for silver as its prices are often determined by increase or decrease in industrial demand.
On the positive side, investment demand for gold seems to be rising as Goldseek.com reported about lack of storage space for gold in Swiss banks. “The report says that Swiss banks are running out of secure storage space for gold bullion held by investors and institutions. The story said that fears of hyperinflation, the grim economic news and the success of the gold ETF’s, has led to a run on the yellow metal and a shortage of safe places in which to store it. When you’re holding gold (especially at these prices) you need security guards, surveillance cameras and room, lots of it. One Swiss bank relocated its stored silver bullion to another site to make more room for gold,” the Goldseek.com report said.
A set of positive earnings reports and upbeat data on housing markets has led to a rush of money into both commodities and equities last week. The gainers were agri-commodities,base metals and energy. Energy prices rose on the Nymex, buoyed by the rally in stocks and the hope that the increase in home sales suggests demand for energy could soon pick up. Corn, wheat futures also surged last week at CBOT.
Some analysts have pointed out that gold prices at current levels may lead to increase in jewellery scrap inflows. Over the past several months market participants have increased their gold purchases at prices near $900 and sold at prices above $950, according to a CPM group analysis for DGCX.
Gold prices are quite buoyant in Asia in tandem with rally in equities and energy. But precious metals sector looks set for a correction before the festive demand in many countries upto December starts rising.
NCDEX GARSEDJDRJUN12 20 June 2012
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