Mr. Prithviraj Kothari, MD – RSBL – Current Fall in Bullion Prices

The prices of precious metals showed a downward trend on Thursday, though they were under the green range on Wednesday. On Thursday, the price of gold decreased by 1.15% to $1,660.6; Silver price also fell by 2.54% to $31.34.
The main reason behind this was the release of China’s manufacturing PMI report. It stated that China’s PMI inched down to 50.4, which means that the development and expansion in China has caught a slow pace, which in turn means that the demand for gold from China will reduce.
However, most traders and investors were more interested in the nonfarm pay roll report that was released on Friday. Gold and silver prices went up after the release of US payroll data.  Gold, silver and equities were all moving on a higher note on Friday.
The U.S. employment rose again by lower than many had anticipated – according to ADP the non-farm payroll rose by 192k – during January: according to the latest U.S. employment report, which was published on February 1st by the Bureau of Labor Statistics the number of non-farm employees rose by 157,000. The main sectors that grew during January were in Retail trade, construction, health care, and wholesale trade.
One likely reason that affected Gold and Silver is that the Federal Reserve is unlikely to make any changes to its very accommodative monetary policy with that news. The Fed has set actual goals for the unemployment rate – 6.5 percent – and quantitative easing is expected to continue until the unemployment rate hits that figure.
Other data showing improved US factory activity and better consumer confidence data also set the prices upwards. Spot gold was up 0.6 per cent a $1672.61 an ounce retreating from an earlier high of 1681.70.
The metals went low in a sell off position after St. Louis Fed President James Bullard said that the US Economy will show a better performance this year, which will put the central bank in a position to slow or halt its massive bond buying.
As per the MCX india site, almost 4.7 tons of Gold is already in their warehouse. This is a huge amount of Gold that is sitting idle with fewer takers. Technically, for the past 4 weeks the metal has been stuck within a $1643 to $1695 trading range. These long periods of sideways consolidation typically result in a break in the next direction of the trend. We are starting to think the market is building a base considering that 3 of the past 4 weeks have been up weeks. A close back above $1695 would bring in fresh buying looking for a return to October highs.

Going forward the factors that will affect the Gold Price are:

  • Easing Eurozone stress and better financial conditions
  • Growth momentum & Stimulus program in US,
  • Indian Government policies
  • Strengthening of Indian rupee against Dollar

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