Expect further selling in Gold till Rs 25300: Mangal Keshav

Mangal Keshav's research report on commodities

Gold futures sank below USD 1,400 per ounce on Wednesday, marking their lowest close in almost 4-weeks as the US dollar strengthened, equities climbed and outflows from gold exchange-traded funds continued.

Gold holdings of SPDR gold trust, the largest ETF backed by the precious metal, declined to 1,047.13 tons, as on May 15. Silver holdings of ishares silver trust, the largest ETF backed by the metal, declined to 10,392.35 tons, as on May 15.

Gold premiums in India, the world's biggest buyer, has more than doubled on speculation that government restrictions on bullion imports by banks to rein in a record current-account deficit would reduce supplies. The fees paid by jewelers to dealers for bars has jumped as high as USD 40 per ounce from USD 17-USD 18 - Bloomberg.

The US dollar remained broadly higher, despite weaker data on New York State's manufacturing sector and US wholesale prices.

The ICE dollar index, which measures the greenback's movement against six other major currencies, traded at 83.795 on Wednesday compared with 83.575 on late Tuesday.

The euro dropped to a 6-week low against the US dollar on a closing basis, fell after quarterly economic reports from France, Germany and the euro zone missed expectations.

Copper futures declined to a one-week low, amid signs that economies are weakening in countries that are the world's biggest consumers of the metal, contributing to a surge in stockpiles that are at the highest since 2003.

Total zinc stocks in LME warehouses rose to 1,120,900 tons, reversing a series of declines in locations such as Antwerp, Johor and New Orleans in recent weeks that had taken inventories back down towards the 1mn ton mark.

Also Read: Here's how Anand Rathi recommends trading gold, silver

Crude oil futures recovered from early losses to close with a slight gain, as an unexpected decline in the past week's US crude supplies helped provide enough support for prices to mark their first gain in 5-sessions.

Crude supplies fell 600,000 barrels, Gasoline supplies climbed by 2.6mn barrels while distillate stockpiles added 2.3mn barrels, as per EIA report.

Natural gas futures closed higher for the third straight day, backed by warmer forecasts for the Mid-west and East and some technical buying after prices lost ground in the previous 3-weeks.

Natural gas inventories are expected to increase by 87-90bn cubic feet, actual data will be released by EIA later in the day.

Technical Alerts

Gold: June futures have been consolidating in a range… however prices still hold strong resistance at 27500 & trend remains down till the given level holds. On the lower side, support holds at 26580, a breach below the given levels… further selling is expected till 26000 & 25300 levels.

Spot Gold: Prices did recover towards USD 1,490-USD 1,495 per ounce 2-weeks back, as was expected… we now again expect prices to decline towards USD 1,400 & USD 1,300 (50 percent retracement) with strong resistance at USD 1,500. Retracement calculated from bottom of USD 682.5 to top of USD 1,920.9.

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