Business Daily from THE HINDU group of publications
Monday, Jul 24, 2006

Cross Currency

Group Sites

Agri-Biz & Commodities - Gold & Silver
Web Extras - Outlook
Gold likely to trade sideways

G. Chandrashekhar

Profit taking has become the norm

INVESTORS' FAVOURITE: A worker giving finishing touches to a gold ornament at a manufacturing unit in Kochi. Rise in crude oil prices, strengthening of inflationary pressure, signs of stagnation in the real estate market and tension in West Asia have made gold a darling of investors. During the weekend, gold was quoted at $620.20 an ounce for August delivery. - K.K. Mustafah

Mumbai , July 23

Gold market continues to remain edgy with investors ready to cut their long positions at every rise in price. Profit taking has become the norm in the absence of a clear direction for the market already buffeted by rapidly changing geopolitical situation, inflation versus growth dilemma and gyrations of the dollar. On Friday, the yellow metal was quoted at $ 634 an ounce (London PM fix). Despite recent movements, speculators continue to hold moderately large net long position.

There is belief that the recent recovery - albeit modest - after the price collapse of May has provided fresh stimulus to players (read, speculators) in major consuming markets such as India and China who closely follow global trends. There appears to be renewed interest in gold in anticipation of a further price rise. Given the US economic data and less hawkish stance of the Fed, many believe it is only a matter of time before the dollar begins to weaken, something that would be positive for gold.

Geopolitics, as always, will continue to play its part.

Little wonder then that in the absence of clear market impacting developments, gold is increasingly moving on the basis of technical factors, which remain in the forefront of market's attention.

Next round of targets

According to technical analysts, the 21-day average of $621 continues to provide support but a price fall below such level is likely to trigger further downward movement especially as momentum continues to fade. Analysts are looking for $590 and $560 as the next round of targets.

The recent nervousness in the gold market may continue to persist over the coming weeks as the market lacks clear signs of direction. However, the macro-economic environment, which could result in weakening dollar, is positive for gold. Any further escalation of tension in West Asia will also support the yellow metal.

Overall, one could expect gold to continue to trade in a largely sideways pattern in the next few days with the impact of dollar movements, interest rate cycle and geopolitical developments providing much of the market's direction.

More Stories on : Gold & Silver | Outlook

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
ITC clarifies on wheat procurement

AP Govt announce fresh guidelines on contingency plan for ryots
Monsoon in deficit but may rev up in medium term
Soya sowing over in 85 pc of targeted area
Karnataka urged to release Rs 10 cr
Gold could test support, rise
Gold likely to trade sideways
UTI hopes to launch Gold ETF in 2 months
Investors may support palladium prices
`India can become global metals hub'
Hindustan Zinc gets eco award
More grains getting diverted for bio-fuel
Pepper could witness firm trend
Vijaya Kisan Card for farmers
TN plans hi-tech markets for agriculture

The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription
Group Sites: The Hindu | Business Line | Sportstar | Frontline | The Hindu eBooks | The Hindu Images | Home |

Copyright 2006, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line