Bullion Weekly Technical Outlook and Commodity Trading Tips
Gold Mcx August Commodity Trading futures fell by 4.2 percent to Rs 25820 per 10 Gms mark, notwithstanding the weaker Rupee which depreciated round 1 percent in the futures markets in India. However there was wide divergence between price performance of the expiring June contract and the August as June only fell around 2.5 percent to near Rs 26750 as per latest quote in the evening session on Friday (IST). Last week we had talked about sudden reduction in June-August backwardation which slipped down to Rs 200 as against over 650 per 10 Gms during the previous week. As Gold June contract nears expiry, it got merged with the actual higher Gold prices at the Ahmadabad spot markets and thus we once again seeing this backwardation rising to near Rs 900 mark. As per the next week is concerned, we have a host of economic cues to be watched which are likely to increase the volatile movement in the commodity. We have the important Jobs data from US Labour department as well the private sector reading from ADP. We feel these employment numbers during the middle and latter half of the week would be the main attraction for the Bullion basket next week. Note that we have seen very good run-up in Jobs additions both from the private and government backed numbers over last two months. However this strong increase was also a positive reaction to the fairly bad readings in February and March month. Last month both the ADP and the Non-farm payrolls data came very strong beating expectations wherein the Non-Farm payrolls data showed April Jobs addition to the tune of 288K. Positively, the unemployment rate slipped to 6.3% its best since the financial crisis. Amidst the all the above optimism, labor force participation rate fell 0.4% to 62.8% marking its lowest point in decades. As per next weekâ€™s data, Bloomberg expectations show an estimate of 218K, a big fall from last month. In case the reading actually disappoints a bit more in this regard, we could see some reverse action happening into gold commodity towards the end of the week. On the other side of the Atlantic, we have another major vent being played out i.e. the BoE and the ECB monetary policy meeting. Already the Euro has been under pressure lately on expectations that the ECB might go for some policy action this month. In case the same thing happens, we could see extended fall in the shared currency which might eventually push the USDX higher, while likely to push the dollar denominated commodities including gold and silver lower. While actually any policy action happens from ECB or not, in either case when we look at the US or the European cues, we advice traders to be ready for high volatility in the Gold commodity next week.
Overall we feel there are a number of important economical/political/sentimental factors which have been driving gold and silver lower lately. While we have been maintaining a bearish bias in the commodity for many months now, we continue to hold our negative view in the next week as well. Some of key factors are: We have continued to see ease in problems in the Eurasia region. Gold is one such commodity which gets more investment in the time of economic or geo-political uncertainty and thus ease in tensions is playing against gold US equity markets continue to make record highs whereas the USDX has managed to keep its head high notwithstanding the mixed to negative set of economic cues from the US lately. Persistently higher returns from equity markets have been driving investors from gold to equities across the globe with similar scenario mostly following in the Europe and even in some parts of Asia. Demand over the physical side from India and China is still missing whereas institutional investors have been on a selling spree. As per the latest reading, investments in the SPDR gold trust holdings stands at 785 MT. Though the same has marginal recovered from lows of around 776 MT lately, overall still ETF investment stand at worst levels since early 2009. While overall broad bias in the commodity continues to be on the weaker side, our technical study shows gold commodity trades near highly oversold phase both in the international and domestic markets. We feel traders should be ready for some pullback in the commodity. With huge number of economy and monetary policy related cues due in the next week and expectations over volatility high, we recommend selling the commodity from higher levels next week Gold August MCX Commodity Trading futures prices continued its downside journey in the last week by extending the previous weekâ€™s trend. As of 30 May, 2014 prices are closes at 25881, down by -3.9 percent from the previous week close. We are still continuing with the same view for the coming week. In the daily chart prices are hovering near oversold territory and expected to see a higher correction before resuming its downtrend. Strong resistance is seen at 26500 levels, which is expected to limit the upside move. On the lower side supports are seen at 25600 followed by 25250 levels. For short term traders we suggest selling at higher levels Gold Mcx Commodity Trading Levels for the Week: Trend: Downside Support on Downside at 25400-25400 Resistance on Upside at 26100-26400 Silver Commodity trading futures for active July expiry contract at Comex had a similar trading direction as seen in gold though losses were moderately lower to the tune of 3 percent to $18.85 per ounce. In the Indian markets we saw a near similar traded though Rupee deprecation added some support to the local price performance. Silver in Indian MCX markets for same monthâ€™s settlement saw a loss of fewer than 2.25% to Rs 39885 per Kg. As also said earlier, Silver as a commodity follows demand and pricing related cues both from precious as well industrial metals as it is consumed in big way in both these segments. However when we look at the price action, silver is highly dependent on the performance of Gold commodity and follows the direction set-in by the yellow metal. Moreover divergence in its returns either
higher or lower as compared to gold is normally dependent on simultaneous movement in industrial related commodities. With last weekâ€™s performance in industrial metals at LME remaining mostly mixed to positive we could see marginal outperformance in silver movement as compared to gold. Overall for the coming week, we feel the broader trend in silver would continue to be taken by movement in gold. As also said above, we have a huge number of critical economy and monetary policy related cues due next week which are likely to drive high volatility in the complex. There is dull trade as per the Silver ETF investment is concerned while industrial demand from China too remains subdued. Thus on a cumulative basis, we maintain our selling view in the commodity next week while considering the anticipated volatility, we advice traders to initiate short on pullbacks only Silver July MCX Commodity Trading futures prices traded downside in the last week. As of 30 May, 2014 prices are closes at 39586, down by -1.8% from the previous week close. Prices are trading near oversold zone and expected to see a higher correction before resuming its downtrend. Key resistance level is seen at 41230 levels (previous week high). On breach and daily closing above 41230 may change the view towards upside Silver Mcx Commodity Trading Levels for the Week: Trend: Downside Support on Downside at 39000-38500 Resistance on Upside at 40500-41300 Commodity Trading Tips Sell Gold Mcx Aug on Rise near 26300-26350 sl 26750 Tgt 25600-25300 Sell Silver Mcx July on Rise near 40350-40400 sl 41250 Tgt 39600-28900