Gold investors eye EU’s next move

Gold moved higher in the initial part of the week and closed lower on Friday as news of the EU reviewing the sanctions on Russia began to surface. At $1,304.7 per troy ounce, gold was down 0.3 per cent for the week. It was trading at $1,319.3/ounce on Thursday. The number of people filing for jobless claims in the US rose more than expected last week. The US Labour Department reported that the claims rose to 3,11,000, against the expected 2,95,000.
Weak economic data from the Euro Zone also helped gold prices inch up.
German gross domestic product contracted by 0.2 per cent in the June quarter, after a 0.7 per cent growth in the March quarter. However, demand for gold in the physical market dropped. The US SPDR Gold Trust, the largest gold backed exchange traded fund in the world, reported a marginal drop in holdings. The fund’s gold assets dropped to 795.6 tons from 795.86 tons in the beginning of the week. The WGC’s second quarter report that was released last week showed that the global gold demand fell 16 per cent in the June quarter over the same time last year. Silver and platinum also lost their sheen. Silver dropped 1.7 per cent to 19.57/ounce. Platinum ended the week at $1,456/ounce, down 1.3 per cent.
In India, spot gold prices fell following gold prices in the international market. Gold price (24 karat) on Friday was `2,832/gram, down 0.8 per cent. The sharper loss relative to international price was due to appreciation in rupee.
Cues to watch
The European Union’s Ambassador to Moscow, Vygaudas Usackas, is reported to have said that the EU is ready to lift the sanctions on Russia if the situation in Eastern Ukraine stabilises. This about-turn by the EU was only expected. In retaliation to the EU’s ban on the European companies doing business with Russian banks and energy companies, Russia recently banned import of food items from Europe.
With the Euro Zone countries already struggling to get out of the woods, the move by Russia meant more problems for the European economy. Going ahead, if the EU makes friendly overtures and tries to patch up with Russia, gold may lose its sheen. However, the late Friday news of attack on Russian convoy by Ukrainian rebels adds to confusion on the stance on EU. This week in the US, home construction data is expected on Tuesday. On Wednesday, minutes of the FOMC meeting of July 30, will be released.
Thursday will see the Labour department release the weekly jobless claims data. In the domestic market, gold investors need to watch out for the rupee. Last week, the currency had broken the previous week’s bearish trend and crawled up. It closed at 60.77 against the greenback on Friday, up from 61.12 in the previous week. This was helped by the sharp drop in crude oil prices following easing of the tensions in Ukraine. However, as crude oil prices retracted on Friday itself on escalation of tensions in Ukraine, one needs to wait to see developments this week before taking positions in gold.
On the MCX, gold futures closed at `28,614 (per 10 gram) on Friday, down marginally from the previous week’s close of `28,604. Silver futures ended at `43,263, down 0.7 per cent.
On the charts
Spot gold prices may continue to move sideways for some more time, $1,300 is working as a strong support for the metal. MCX gold turned down before getting to its first target of `29,000 last week. It hit a high of `28,891 and reversed lower as rupee appreciated sharply. This week, upper side targets are `28,800, then `29,000. On the downside, targets are `28,000 and `27,800.
MCX Silver hit the upside target at `44,000 and then fell to strike our downside target too. This week, upper targets will be `43,600 and `44,000. After this the next level would be `44,600.
On the downside, the levels would be `43,000 and `42,700.
Source: Hindu business line

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