Gold Prices are off their 1-month lows on some short covering and bargain hunting, but the under tone continues to remain cautious as Gold Markets enter a wait-and-see period for the 2 days now. Gold Prices slipped to the weakest levels in a month amid a calm & quite trading session on Monday before recovering slightly as prices became more attractive. But large speculators & Hedge funds unwinding long positions on worries about the health of the global economy could curb immediate & sharp gains. Gold ETP holdings fell to 184,404 contracts, the lowest since Sept. 18. Comex Gold Dec Futures slumped to $1714.4 yesterday but closed up around $1726.3 & have today rose to $1731 also. Opportunistic buying may occur on dips to supports of $1697.5 to $1702 range. The challenge, though, is that it is often much easier to express the desire to buy the dip when prices are trending higher than to execute the trade when prices are weakening. A correction in Gold Prices will therefore act as a test for market participants who have held a positive but unrealized view on Gold to prove their commitment by pulling the trigger once prices become more attractive. A correction to lower level support of $1666 in Gold Prices will intensify only on a close below $1697.5 & if seen, the same will be sharp & short-lived as Gold Prices will surely be strengthening towards the year end. Gold Trading could remain dicey for sometime to come.
Gold Bulls to Watch for Inflation Signals:
All eyes will be concentrated on the FOMC policy meeting & rate decision starting today & concluding on Wednesday. The outcome of the meeting is likely to be more inconsequential than the previous two, with no shifts expected in the Fed’s monetary policy stance or bias. The Fed may use this meeting to lay the groundwork for the post- Operation Twist policy environment; though any concrete decisions are expected to be announced only in the Dec FOMC meet. In addition, on Wednesday economic data released include Initial Jobless Claims & Durable Goods Orders, on Thursday are Pending Home Sales and following on Friday are GDP & Michigan Sentiment. The Gold Bulls would be awaiting inflationary signs & reports which could trigger buying at lower levels.
Gold & Metals may remain sideways in Near Term:
Hedge funds cut bullish commodity bets to the lowest since July as speculation that governments in China and Europe aren’t doing enough to boost growth drove prices to the biggest loss in five weeks. Visibility on order books for Base Metals is very low indeed and there is huge undercurrent of unease & uncertainty around the growth trajectory of the Chinese Economy. Copper traded on the London Metal Exchange has fallen through its 50- and 200-day moving averages. I think we’re coming closer to the bottom of the near term range in most Base Metals & Silver also. Money managers added $90 million to commodity funds in the week ended Oct. 17. While Gold Trading Markets welcomed the Federal Reserve announcing its third round of aggressive economic stimulus –the QE3 last month, the unlimited & open time framed Quantitative Easing program underlines worries that the U.S. economy may be in worse shape than feared & widely known. These fears will soon turn to reality once the US Presidential Elections are done with. Most US Economic data announcements will continue to be artificially dressed up till then. European Union leaders face a few months of tough bargaining on money, power and the future governance of the Eurozone before they can boost market confidence that the threat to the single currency has been contained to a large extent. The Euro inched up after Spain’s prime minister won a boost for his austerity drive with a regional election victory. This has bolstered notions Spain will be seeking EU financial assistance in the near term. Some disappointing economic news from Japan that suggests the Bank of Japan will implement fresh monetary stimulus measures soon. If accommodative fiscal policies continue globally, Gold Prices could go significantly higher. Bloomberg said Gold holdings increased 7.7% to 178,426 contracts, the fifth straight advance and the most since Feb. 28, CFTC data show.
Gold Prices to gather support at Lower levels:
Falling equities could force speculators to cash in Gold to cover losses and to turn to the safety of the US dollar, although Gold could find support at around $1,700, a level which may spark more buying from jewelry makers ahead of the year-end festive season. Gold traders will be watching to see if bargain hunting emerges after the recent pullback that has taken Gold Prices to a five-week low. The loss of upward momentum in the short term means potential for a fresh renewed buying towards a higher target objective. India enters its peak Gold buying seasons over the next 4 weeks & Gold Demand is expected to be high considering the recent INR rise against the US Dollar which has softened the landed Gold Prices in Indian Markets. If the INR continues to maintain its run up against the US Dollar, the fresh Gold Demand in India will also prompt restocking by retailers to meet the Dhanteras & Diwali Gold jewelry & bullion Demand. In Africa, over 8,000 workers involved in an illegal strike at Gold Fields’ KDC East mine will be fired if they fail to return to work on Tuesday morning, the company said. Copper production reported by many of the major producers last week was largely disappointing & could maintain the chronic deficit. There is also a substantial risk that the Copper output could again disappoint in 2013 & with reported inventories back to pre-global financial crisis lows, such an outcome would benefit copper prices in the near future. Copper net-long positions rose to 23,776 contracts, as traders have trimmed more gross shorts than gross longs. Silver maintains long term bullish momentum till above $30.