Expect MCX Gold prices to rise; Karvy recommends buy

Karvy Commodities Broking has come out with its report on bullion. According to the research firm, MCX gold prices are expected to rise in today’s trading session, so one can buy gold for the day.

Gold: The week started on a very rough note. As of 6:40 AM this morning, gold was seen trading higher by half a percent while the euro is trading lower by over 1%. We are now seeing a large divergence among the asset classes. All the Asian equities are trading lower, global currencies are weakening, the Japanese yen appreciating and global equities are expected to be in the red. Unexpectedly, news that Cyprus may alter bank tax has been coming in. This is acting as a catalyst for a downward movement in the market . With all asset classes under pressure, we see gold moving higher by $10 over $1600 due to its safe haven appeal. Nevertheless, it’s going to be a tough move during the day. As we proceed, the market would keep the Cyprus news at the forefront which could cause volatility . We need to see how gold would move differently compared to the euro in today’s trading session. We expect no other news or events other than Cyprus’ move . We expect to gold continue to grow as a safe haven. However, gains could be limited due to hefty losses in the euro. In economic data, only the euro zone's trade balance number was released; the actual number should play a key role for the euro. The US housing market index is due for release, which may show a slight increase from the previous month. Gains may be limited during the US session.

Interestingly, we are going to see a good amount of gain in gold prices on the domestic front (India). The euro trading down by 1% and Asian equities being in the red will certainly keep the rupee under pressure. In the meantime, COMEX gold is trading higher. So, the parity for MCX gold would turn out to be higher. So, we expect MCX gold prices to rise in today’s trading session. we recommend buying in gold for the day.

Silver: This morning, silver prices are trading at $28.74, down 10 cents from the previous close. As explained in the gold outlook, the Cyprus development has brought all the asset classes under pressure. The euro is trading down by over 1% and metals are also down by around 2%, keeping silver prices down. As the day progresses, we expect silver prices to remain lower though the fall could be limited due to the rise in gold prices. For the day, the euro's performance should be a matter of concern. Any further developments in the euro should pull silver further down. Since we expect silver prices to trade lower, we suggest adopting a ratio strategy for the day. The strategy would be to to buy gold and sell silver.

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