Upmove in Gold Not Likely to Last

July 5, 2013 at 08:12


After being written-off as a wealth commodity, gold is back in action. At least it appears to be so looking at the bounce back in prices in the past few sessions.

Gold prices have gained around 2 per cent this week and are hovering around $1250 an ounce on the back of short covering and some physical buying also.

The yellow metal witnessed sharp correction last quarter and fell over 23 per cent. It touched a 34-month low of $1180 an oz last week.

The political tension in Egypt following ouster of President Mohamed Mursi and resurfacing of debt crisis concerns in Europe following slump of Portugal bonds are providing support to the prices.

The holdings in the SPDR gold ETF, the largest bullion backed exchange, seems to be holding steady.

Cash crunch fears in China have also been supportive for gold prices. As per reports, the Chinese buyers are on sidelines awaiting another dip in gold prices to execute buys. The low gold prices, which are close to the cost of production, are putting pressure on mines as well.

Investment guru, Marc Faber says that he will buy gold at all declines even if it falls to $1000 an oz.

Investors are awaiting the US Non Farm payroll data for direction on Friday. A strong data will mean possibility of the US Federal Reserve curbing bond buying and it will put gold under pressure.

However, in India, which is one of the biggest consumers of gold, monsoon is a slack period. There are no festivals or weddings around this period which would drive the prices higher.

The international markets see strong support at $1,180 and resistance at $1,260. A breach of any of these levels, will give clarity on the direction.