Sell gold, recommends Karvy

Karvy Commodities Broking's research report on bullion -

This morning, gold October futures prices are trading at USD 1409, marginally down by 0.14 percent. SPDR holdings, the largest bullion-backed ETF remained unchanged at 921 tons from the previous close. The dollar index is trading at 81.92, weakening gold prices in the morning. From the derivatives point of view, prices have declined while volumes and open interest have increased, which indicates that new money is coming into the market and traders are opting for aggressive short-selling. This might slightly pressurize gold prices. From the euro-zone, German retail sales are expected to increase along with the euro-zone confidence and unemployment numbers. This might support the euro and extend the gains in gold prices.

However, during the US hours, personal income and spending might remain on the positive side, backed by better GDP numbers, which would limit the fall in the dollar and, gold prices might shed its gains. Better US economic numbers increased concerns that the Fed might taper the quantitative easing soon, which might pressurize gold prices. At the MCX, the rupee is trading slightly weak against the dollar compared to the previous session, which might support a rise in gold prices. However, any volatility the in rupee might weigh down on gold prices. Hence, the markets will be closely watching the developments from the US central banks and the rupee performance in the domestic market. Therefore, investors should remain cautious in the evening session. On the whole, we recommend remaining on the selling side.

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