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Sep 28, 2012, 11.54 AM IST | Source: Moneycontrol.com

Gold may test USD 1712: Microsec

Microsec has come out with its technical report on Gold and Silver. According to the research firm, Gold could test USD 1712 levels if it will close below USD 1731. Silver traded higher, closing at USD 33.93. The next support is at USD 33.15.

Microsec has come out with its technical report on Gold and Silver. According to the research firm, Gold could test USD 1712  levels if it will close below USD 1731. Silver traded higher, closing at USD 33.93. The next support is at USD 33.15.

Gold and Silver:

The markets were in a risk off mode with the dollar making strong gain over night. Gold opened sharply lower at $1755 and made a intraday high of $1765 but sustained pressure on the metal, however coming from Spanish concerns, saw gold quickly tumbled and reached its intra day low of $1736. gold was struggling there but with renewed buying interest at lows, the metal recovered almost all of its losses and closed at 1753. Silver also opened lower and sold off in a tandem with gold, but at the end if the day silver manage to recovered form its day low and closed at 33.88. There were a number of data flows and negative comments that drag down the bullion rates. For an example, a much-better-than-expected US consumer confidence reading. The number for September came in at 70.3 (consensus: 63.1), a seven-month high, and well above August’s 60.6 reading. Shrugging off higher gasoline prices and the imminent fiscal cliff, US consumer sentiment appears to have been buoyed by a strong performance in equity markets. The apparent improvement in consumer confidence dented investor interest in the complex, as a stronger US economy implies a weaker monetary response from the Fed. Adding to the concern was the rebound in the Richmond Fed Manufacturing index, which came in at 4.0, well above the market’s expectation of -5.0.

Beside that, the Fed’s Plosser threw a wet rag on hopes that the Fed’s quantitative easing would stimulate the US economy, which understandably took commodities prices lower. Precious metals largely followed suit, dragged down by negative sentiment and perhaps a concern that a questioning of the effectiveness of quantitative easing might see the Fed rethink its current open-ended commitment. we think that this is extremely unlikely, and continue to believe that an accommodative monetary policy stance from the Fed will support precious metals, particularly gold and silver, well into 2013. We are cognizant of the current overextended speculative length in some precious metals futures markets, and are consequently not surprised at the heightened volatility, thus for gold and silver, buying on dips remains our preferred strategy.

Key technical area: Yesterday, gold broke through the bottom of the recent range on an intraday basis and closed lower. This is showing a weakness in gold in a near term (RSI/price trends divergence is gone; see 25th sep report) but as we indicated yesterday that we could retreat to $1712 without damaging the longer term uptrend. We believe that gold could test these levels if it will close below $1731. Silver traded higher, closing at $33.93. The next support is at $33.15. We have been neutral as it is not yet clear whether this is a consolidation or a reversal.

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

To read the full report click here

READ MORE ON  Microsec, Gold, Silver

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