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Sunday, June 3, 2012

Bulls Make a Comeback to Gold Counters Funds pull out money from stock markets to invest in bullion

Traders are back at betting on gold after last week's global stock market meltdown. 
Retailers and marketmen chose to buy the metal pushing its prices by . 960 per 10 grams, the biggest jump in 11 months, in spot markets on Saturday. 
The rally to the new high of . 30,300 per 10 grams was triggered by the weak US unemployment data released on Friday. 
MCX gold for August contracts touched . 30,160 per 10 gram, up by 4% from the previous session. Open interest and trading value for August contracts were recorded at 16,595 and . 1.31 lakh crore on Saturday. 
Prices had not made much headway in the last few weeks due to the depreciation of the rupee against the dollar in the last two months. But traders expect prices to go up to . 31,000 per 10 gram in the next 10 days. "People have once again realised that gold is the only safest haven against economical uncertainty. Until the release of US economic data on Friday, it was believed that gold was slipping towards the risky asset class. But gold certainly looks bullish now," said T Gnanasekar, director (research), Comtrendz. Funds have shifted their focus to gold buying or trading as stock markets across the world are not performing well, he added. 
Brokers believe the deepening Eurozone debt crisis and the Greece elections on June 17 have supported the metal's safe haven appeal. The metal jumped 4.24% to $1,626 per ounce, the biggest rise in the last 11 months, in the international market. Spot gold hit a two-week high of $1,629 an ounce and was up by 4%. Gold futures on Nymex settled at $1,620 an ounce with trading volumes about 50% above its 30-day average. 
"The next 15 days will make the picture clearer for gold. Traders have flocked towards gold as they feel the last trading sessions weren't great due to weak sentiments. They have realised the risk is less in gold than any other commodities or asset classes," said Naveen Mathur, associate director, currencies and commodities, Angel Broking. 
It seemed that gold was losing sheen after jewellery and investment demand fell by 19% and 46%, respectively in the first quarter of 2012. Futures trading on commodity exchanges have fallen by 35% this April from April 2011. "But it was a temporary fall. Investors and traders were confused over conflicting international 
sentiments. And therefore, they started exiting gold. But the buying trend is back and it will go on for long," said C P Krishnan, wholetime director, Geojit Finance. 
"Indian investors have traditionally believed in gold as safe haven. The metal will continue to stay long. Economical factors across the world are going through a rough change, and hence, investors would only believe in their traditional choice as it has given them the best returns," said Madan Sabnavis, chief economist, Care Ratings. 
Back in Demand 

• Traders expect prices 
to go up to . 31,000 per 10 gram in the next 10 days 

• The rally to the new 
high of . 30,300 per 10 grams was triggered by the weak US unemployment data released on Friday



Gold vaults 4% for biggest 1-day rise in 3 years

Gold surged 4% on Friday, its biggest one-day rise in more than three years, as a surprisingly weak US payrolls report added to fears about a global economic slowdown and fuelled talk of further US monetary easing.
The precious metal fell in early trading, then rebounded USD 60 an ounce from its session low as funds piled into gold for protection against economic uncertainty after the US unemployment rate rose for the first time in 11 months.
Gold rose 3.5% this week, its largest gain since late January, when investors were already fretting over Spain's poor finances and a possible Greek exit from the euro zone, which could send Europe's debt crisis spiral out of control.
Bullion broke its trend of trading in sync with riskier assets, rising on a day when Brent crude oil plummeted below USD 100 a barrel and the Dow Jones industrial average fell 2% to wipe out this year's gains.
Technical buying also helped as the metal is setting up for a bullish triple-bottom chart pattern after gold held key support near USD 1,530 an ounce, which it held for most of this year.
Gold's rally was reminiscent of its rise earlier this year when the Federal Reserve said it would keep interest rates at zero for the next several years and indicated a new stimulus program was possible to reinvigorate economic growth.
"People are speculating that there will be some form of program coordinated by central banks, which is ultimately inflationary and gold catches a bid," said Jeffrey Sherman, commodities portfolio manager of asset manager DoubleLine Capital which oversees USD 35 billion in assets.
Spot gold hit a near two-week high of USD 1,629.41 an ounce and was up 3.9% at USD 1,624.20 at 3:11 pm. EDT (1911 GMT), its largest one-day rally since January 2009.
US gold futures for August delivery settled up USD 57.90 at USD 1,620.50, with trading volume about 50% above its 30-day average, preliminary Reuters data showed.
FUND, TECHNICAL BUYING
Gold is forming a potential triple-bottom pattern dating back to last September, said Rick Bensignor, chief market strategist of Merlin Securities.
Gold ended May with its fourth straight monthly decline, the longest in 12 years. Friday's rally extended gold's gain year to date to around 4%.
"Larger institutions will commit money to gold in ways they never had before. We are talking about CALPERS, Yale and Harvard," said Robert Lutts, chief investment officer of Cabot Money Management with over USD 500 million in client assets.
Prominent hedge fund managers led by John Paulson have in recent years invested in gold as a hedge against inflation and the loss of purchasing power in their portfolios as a result of easy monetary policy used by central banks.
Gold gained 15% earlier this year after the US Federal Reserve said in January it would keep interest rates near zero until at least late 2014 and could introduce a fresh round of asset-purchase program known as quantitative easing.
Among other precious metals, spot silver rose 2.4% at USD 28.44 an ounce. Spot platinum was up 2.2% at USD 1,440.24 an ounce, while spot palladium edged up 0.2% at USD 609.99 an ounce

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