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Weekly Commodity Research Reports

Bullion Weekly from 21st January- 26th January 2013

Gold - COMEX gold looks set to challenge the $1700/oz. level extending the upward momentum seen in last few days however we do not expect a sustained rise. Any sharp gains in gold will be challenged by uncertainty about central bank measures. Fed officials have expressed concerns about inflation and bulging balance sheet, ECB, BOE and China have kept monetary policy unchanged. Bank of Japan has expanded asset purchases however some have expressed concerns about impact of loose policy on yen. Concerns about US debt will also weigh on commodities in general. Policymakers will continue negotiations over spending cuts and debt limit however no decision is expected in the near term. The euro may also shed some of the recent gains as uncertainty persists about regional economies. Gold will continue to be affected by movement in US dollar and commodities and focus will be on US, Chinese and Euro-zone economy. For US, focus will be on debt talks, economic data and comments from Fed officials. Data will help form expectations about continued asset purchases. For euro-zone, focus will be on economic data and regional bond auctions.

Gold in domestic market has seen some disconnect from international market due to Indian rupee's movement and this trend may persist in the near term. We may see some recovery in Indian price this week as Indian rupee stabilized near 53.5 level while international price moved near $1700/oz. Short covering ahead of expiration of Feb. contract will also lend support. However we do not expect a sustained rise in international price and this will limit upside in domestic front as well. On domestic front, focus will also be on any decision relating to import duty. We expect to see gold to trade in range of Rs.30300-31100/10 gram.

Silver - Silver has moved past the $32/oz level for the first time since Dec. and we could see some extended rise on back of firmness in gold and platinum price. However we do not expect a sustained rose and silver may correct from around $32.5/oz level. Silver may trade under pressure as reduced expectations of asset purchases by US central bank will weigh on gold and industrial metals. ETF buying may also weaken at higher price. Also weighing on silver price is higher stocks at CME warehouses.

On domestic front, we could see some correction in silver price in line with international market . However a major price determining factor for domestic price will be the trend in the Indian rupee. We expect silver to trade in a range of Rs.58500-60300/kg.

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