Tuesday, 16 April 2013

Gold Recovers Near $1400 After Blood Bath

MCX Gold futures are up around 1.50% on the day after a freakish slide ended in global markets and some buying finally emerged. The COMEX Gold prices recovered from a two and half year low of $1321.50 per ounce in Asian trades. Equities were mixed throughout the day today on the back of a torrid collapse in US stocks. Traders seemed to have gotten adjusted to the frantic moves in last few sessions and Gold was seen picking up strength in response to its traditional friend - a weak US dollar. COMEX Gold is up nearly $80 per ounce in intraday moves and quotes at $1394.90, up $35.20 per ounce on the day.

In a key development in global markets, the leading global futures exchange- CME said it will raise the collateral requirements for trading in benchmark gold, silver and other precious metals futures contracts, effective at the close of business Tuesday. The exchange also said it also will increase margins to trade its benchmark natural-gas futures, also effective Tuesday. Margins to trade benchmark Comex 100-troy ounce gold futures will be increased by 19%, CME said in a notice emailed late Monday. The margin to trade silver will increase 18%.

Gold was hammered heavily for a second session yesterday as a massive sell off was triggered once the metal broke under $1500 per ounce levels. The counter lost nearly $140 per ounce on the day- its biggest slide in nearly three decades. US stocks also dropped like a rock after Chinese economic data came in weaker than expected. The country's GDP for the January-March quarter rose 7.7% from a year earlier, weakening from 7.9% growth in the fourth quarter. Industrial production for March increased 8.9% from the year-earlier period, the weakest in more than a year and slowing from a 9.9% average rise for the January-February period.

Locally, panic struck the retail markets when the prices fell under Rs 26000 per 10 grams- its lowest level in nearly two years. Macro data also showed that India's headline inflation slowed to the lowest rate in more than three years in March, spurring expectations that the Reserve Banks of India will cut policy interest rates next month to help the economy recover from its slowest growth in a decade. Wholesale prices, country's key inflation measure, eased to 5.96% in March aft, the lowest rate since November 2011.

The media reports revealed yesterday that India's gold imports have fallen nearly 24 percent in the first quarter of the current year. It will be interesting to see if the local gold traders and bullion merchants buy the commodity in bulk after the recent meltdown. MCX Gold is up today after falling as low as Rs 25270 per 10 grams. This marked a drop of around Rs 5000 over last one month. Some buying picked up thereafter and the metal is now quoting at Rs 25999, up Rs 365 per 10 grams or 1.42% with 1.21% increase. Some minute buying is emerging in the counter.

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