Gold may hold its sheen

Financial Chronicle - - FRONT PAGE -

While most fac­tors point to­wards a pos­i­tive out­look for gold from a long-term per­spec­tive, there are cer­tain down­side risks too em­a­nat­ing from the US Fed­eral Re­serves’ tight­en­ing path and the strength in the dol­lar in­dex. They can cap gains in the pre­cious metal

As the fes­tive sea­son is in full swing, the yel­low metal is flaunt­ing its shine across the board. For the year, gold has out­per­formed riskier as­sets, clock­ing gains of around 9 per cent in the do­mes­tic mar­ket.

While the yel­low metal gleamed in the In­dian mar­kets, its shine faded in the in­ter­na­tional mar­kets with al­most 5.5 per cent neg­a­tive re­turns. This di­ver­gence is be­cause of the sharp de­pre­ci­a­tion in the ru­pee, which in­creased prices on the do­mes­tic mar­kets.

Phys­i­cal de­mand for gold has re­mained tepid in the first half of the year. But the World Gold Coun­cil (WGC) ex­pects the to­tal de­mand to touch lower end of the 700-800 tonnes range this year against 771.20 tonnes in 2017.

Gold has been the favourite as­set for the cen­tral banks to ac­quire this year, due to un­cer­tainty among ma­jor economies, par­tic­u­larly af­ter the out­break of US-China tar­iff skir­mishes.

They are buy­ing gold at the fastest pace in the last six years. Dur­ing Jan­uary-Septem­ber, the cen­tral banks added 264 tonnes of gold in their re­serves.

Go­ing for­ward, gold out­look in the in­ter­na­tional mar­ket will be in­flu­enced by the Fed’s mon­e­tary pol­icy, trend of the dol­lar, in­ten­sity of trade war, ris­ing US debt and other geopo­lit­i­cal fac­tors. Nev­er­the­less, the ru­pee’s tra­jec­tory is the ma­jor fac­tor that will set the tone for gold in the In­dian mar­ket.

Rec­om­men­da­tion: Within the out­lay of stated fun­da­men­tals that por­tray the idea of gold as an ideal in­vest­ment from a medium to long-term per­spec­tive, tech­ni­cal charts are show­ing pos­i­tive sen­ti­ments for the metal, though in the near-term prices look stretched and can wit­ness profit book­ing.

Near-term strat­egy: As gold prices have vis­i­ble hur­dle in near-term at Rs 32,500 per 10 gm, a healthy cor­rec­tion looks likely from the re­cent highs, pro­vid­ing an op­por­tu­nity for short sell trades for a near-term per­spec­tive. Hence, we rec­om­mend sell­ing gold near Rs 32,000-32,050 per 10 gm ($1,245 per oz) for down­side pro­jec­tion of Rs 31,400 per 10 gm ($1,210 per oz) ini­tially and next at Rs 30,90030,950 per 10 gm ($1,180 per oz), while main­tain­ing stops at Rs 32,500 per 10 gm ($1,270 per oz), which is a cru­cial re­sis­tance level. Long-term strat­egy: As the longert­erm trend looks pos­i­tive, we rec­om­mend ac­cu­mu­lat­ing gold on lower lev­els near Rs 30,900-30,950 per 10 gm ($1,180 per oz) at MCX, while con­sid­er­ing Rs 30,450 per 10 gm (200-day EMA) or $1,160 per oz as a level of cau­tion. On the higher side, prices can tar­get Rs 32,500 per 10 gm ($1,270 per oz) as near-term cru­cial up­side and once breached con­vinc­ingly, Rs 33,200 per 10 gm ($1,295 per oz) and Rs 34,000 per 10 gm ($1,325 per oz) look likely on the cards from a medium to long-term stand­point.

Source: Reli­gare Broking

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