Gold Futures weaken despite Rate cuts & Quantitative Easing.
Comex Gold Futures prices for August delivery declined, as expected after the ECB announcements, to $1597.5 from the earlier rises to $1624.5 & Silver Futures slipped to $27.5 from the day’s high of $28.38. MCX Gold Futures prices for August delivery (India) though saw a limited decline to Rs.29600 from the earlier rises to Rs.29836 supported by the INR’s sharp decline / the US$ in the day. MCX Gold Futures rose immediately after a knee jerk down-slide.
Rate cuts & Quantitative Easing moves by the 3 major central banks of the world on Thursday are viewed as a fresh bullish factor for the raw commodity markets, including Silver & Gold Futures, due to the inflationary implications of the monetary easing. European Central Bank and People’s Bank of China have trimmed rates, while the Bank of England also loosened policy through further quantitative easing.
U.S. Non-farm payrolls figure in the report is expected to have increased by around 90,000 in June. However, the non-jobs figure may come in better than that, as Thursday’s ADP employment report showed a rise of around 175,000. Gold futures prices ended theU.S.day session modestly lower on Thursday in choppy trading. Comex Gold Futures have weakened in response to a stronger U.S. dollar and technical’s despite easing by several central banks.
Expectations of monetary easing around the world had boosted Gold Futures prices for the week. Trading could remain subdued due to lack of Momentum & clarity of further direction beyond a range, for the week.
Surprise rate cuts by the People’s Bank of China Thursday suggest that the upcoming Chinese economic data will be weak. Chinese cuts come ahead of a “deluge” of data over the next week or so, including the Consumer Price Index, Producer Price Index, trade data, industrial production, retail sales and gross domestic product. China’s economic data is closely watched by metals traders since the country has become a key global consumer of industrial metals. So far during this current cycle, reserve requirements have been cut by 150 BPs and lending rates by 56 BPs.
Gold Demand could recover slightly in India, as INR, the country’s currency recovers some of its recent weakness. The Indian rupee has appreciated considerably, slightly slowing the upward movement in the Gold Futures prices in India, as a result of the high capital inflows of the last few days.
If there is improvement in the global macro picture due to the recent monetary easing & rate cuts, then there could be a gradual rise in the Gold Futures prices, due to the inflationary implications of the monetary easing.
We hold to our earlier view, only a break in Gold Futures Prices with sustained momentum above $1652.50 will trigger Bullishness & then rises to $1686.25, $1747, $1783 & $1819 may also be seen. The level of $1652.50 is now crucial in Gold for further yearly Bullishness. Current Movement range for Silver Futures is $26.20 to $31.60. Only a break in Silver Prices with sustained momentum above $32.05 will trigger Bullishness & then rises to $34.30, $36.10 & $37.54 may also be seen. The level of $34.30 is now crucial in Silver for further yearly Bullishness.
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