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Quarterly Outlook dated - 22nd February, 2013
- Gold looks firm and is likely to gain support from loose monetary policy, central bank buying and negative real interest rate in major economies. However upside will be challenged by lower demand from India and China. Central banks are likely to continue with loose monetary policies for a long time unless economy stabilizes. We may see some other unconventional measures as well from central banks. However there are still doubts about impact of monetary easing on economic recovery and this may keep market confidence shaky.
Other key factor to determine trend in gold will be US dollar. The US dollar is likely to remain under pressure given Fed's commitment to continued loose monetary policy. Persistent steps by ECB to support their economy will be also limit downside in the euro against major currencies. In the near term we could see volatility in financial market due to elections in US and power transition in China.
Overall, COMEX gold is likely to trade in a range of $1635-1845/oz. in the current quarter and buying on dips is the strategy. On domestic front, gold price has corrected from recent high in part due to recovery in Indian rupee against the US dollar. However a sharp rise in rupee will be challenged by slowdown in the economy and uncertainty about global economy. We expect MCX Gold to trade in a range of Rs.29800-32600/10 gram.
- Silver has also resumed its upward momentum tracking gains in gold price. We expect silver to trade firm on back of gold price. However the biggest challenge for silver will be slack ETF buying, demand concerns and higher mine production. ETF buying has picked up in last few days however it has not been significant and may not sustain at higher levels. Industrial demand may be affected from global economic slowdown. We expect COMEX silver to trade in a range of $29.5-36/oz. and buying on dips is the strategy. On domestic front, we may see silver trading in a range of Rs.58000-64000/kg.
Performance based on date till Oct 31st 2011
Gold Technical Outlook
MCX Gold has been trading positively in a rising channel C-C1 with higher tops, higher bottom formation for the past 3 years.
Strong support for the price is at long-term trend line C near Rs.28000 level and the major trend looks bullish above this support.
Currently the price is nearing intermediate resistance line R with a recent life-time high at Rs.32421 level.
Further if price continues to hold above the previous all-time high at Rs.30428 on a weekly closing basis then it has the potential to test Rs.32550-32600 levels in a time span of 2-3 months.
RSI is firm above the support line and holding well above the 50 mark which indicates long-term bullish momentum.
The intermediate support is at Rs.30428, if it gets breached then the price can test next major support level of Rs.28000. Until price breaches the support of Rs.28000, bearishness can be effectively ruled out.
Strategy: Buying near supports is advisable for the targets of Rs.32600, then Rs.33100
Silver Technical Outlook
MCX Silver had been consolidating in a symmetrical triangle pattern (R-S) for a period of 16 months.
The price broke out of the triangle to the upside about 1.5 months back and is sustaining at higher levels since then.
As seen after breaching the trend line resistance R near Rs.54500 level, the price rallied and touched a 1 year high at Rs.65723 level
The price is currently consolidating in an upward sloping channel S-S1, forming higher tops and higher bottoms.
The immediate support for the price is near Rs.57000 level sustaining above which the price has the potential to test Rs.66890-67000 levels in a time span of 2 -3 months. RSI is currently near the support line and is holding above the 50 mark which indicates positive price momentum.
Until price breaches the long-term trend line support S at Rs.54500 on a weekly closing basis, bearishness can be effectively ruled out.
Strategy: Buying near supports is advisable for the targets of Rs.66890-67000.