Buy MCX Gold August at Rs 28950-29000: Angel

Gold June performance indicates lift in prices backed by risk appetite

A close watch at gold’s performance during the month of June’12 indicates that the yellow metal performed in tandem with the upside in other riskier and higher-yielding investment assets. It’s performance also shows that the currency factor also provided direction to prices not only in the international markets, but also in the Indian markets. Spot Gold prices gained around 2.5 percent during June’12 and in the same period the US Dollar Index (DX) weakened 1.7 percent, thereby making the yellow metal look attractive for holders of other currencies. In the Indian markets however, gains in gold prices were lower than the rise in the international markets as appreciation in the Rupee capped sharp gains. On the MCX platform, the near-month futures contract gained around 2 percent, thus indicating the impact of strength in the domestic currency.

Silver’s industrial application drives it lower despite rise in gold

Industrial and investment demand for silver is witnessing a slowdown. Although gold prices reovered in the month of June’12, silver prices continued to remain under pressure. With the metal having two major price driver’s one from the perspective of a precious metal and other from the view of an industrial metal, it has lost its charm as both. From the point of view of a preicous metal, one is as it is wary of investing in gold as a safe-haven asset and the only factor that supports a rise in gold prices is the risk appetite coupled with the currency factor. In case of silver, not only does this fundamentals apply, but it also takes cues from the performance of other industrial metals like copper, aluminum, nickel, lead, zinc, etc. If performance of the second-quarter of the current calendar year is seen then the decline in case of silver is very steep. While Spot Gold prices corrected around 4.3 percent, Spot Silver prices slumped more than 16 percent, with the metal closing the quarter around $27/oz. In the Indian markets, the Rupee factor came in as a supportive factor and prevented sharp fall in prices and during the same quarter, the metal lost only around 8.2 percent. With the forecast for global economic growth indicating slowdown and with no sight of an immediate turnaround, demand for industrial metals has been a major concern. Industrial activity across the globe has taken a hit and the recent rate cuts may not be able to revive the industrial activity on an immediate basis.

Outlook: From the short term perspective gold prices might witness correction initially owing to the ongoing macroeconomic concerns in major economies of the world and no concrete step towards solution of the Euro debt crisis. However, rise in the risk appetite is likely to be witnessed if central governments adopt stimulus measures to boost the economy. This could provide support to the prices on the upside.

Technical Levels (1 month)

Buy MCX Gold August at Rs 29000-28950, SL-28200, Target-30300

Spot Gold: Trend- Up, Support $1547/$1498 Resistance $1643/$1689

Buy MCX Silver September at 51600-51500, SL-49400 Target -56000

Spot Silver: Trend- Sideways, Support $25.75/$ 24.05 Resistance $ 29.55/ $ 31.62

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