Gold stayed elevated today on follow up buying. The metal approached
its two week highstoday. Demand worries have ensured that the metal does
not extend a smart rally post theUS FOMC meet earlier this week. On
Wednesday, the COMEX Gold futures jumped along withequities as the FOMC
statement removed the word “patient” regarding when todecide to raise
interest rates. However, the statement also pointed out some weaker
USeconomic data recently, indicating that the Fed may not be able to
raise interest rates assoon as it would have liked. The
COMEX gold
futures had dropped under $1150 per ounce tomark another four month low
earlier.
A strong wave of buying lifted the metal from these
levels though the counterconsistently failed to hold on above $1170 per
ounce mark. The COMEX
Gold futures arequoting at $1175 per ounce, up $5
per ounce on the day. A mixed outing in the Asian stocksand weakness in
crude oil prices are keeping a tab on the yellow metal. MCX Gold
futuresare trading at Rs 25977 per 10 grams on the day, up Rs 1 per 10
grams on the day. Thecounter hit a high above the critical Rs 26k per 10
grams mark.
The global economic recovery remains fragile because
of significant risks, according toChristine Lagarde, Managing Director,
International Monetary Fund, stated media reports.One such risk
emanates from the expected tightening of US monetary policy at a time
whenmost other countries are easing monetary conditions. If not well
managed, thisasynchronous monetary policy may trigger excessive
volatility in global financial markets.Another risk is the strengthening
US dollar and its possible impact on emerging marketeconomies. These
countries could be vulnerable because many of their banks and
companieshave sharply increased their borrowing in dollars over the past
five years. A further riskis a prolonged period of low growth and low
inflation in Japan and in the Euro Area –although we are beginning to
see signs of an improvement in activity and inflationexpectations in the
Euro Area.
Gold soared Wednesday after the Federal Open Market
Committee indicated a slower paceof rate hikes, following the removal of
the word “patient” from its policystatement. Stocks also jumped with
the Dow surging 1.3%, to close at 18,076.19, aftertrading down 100
points just before the statement’s release. Productivity in the
USeconomy has been disappointingly low, Yellen noted. The bright side is
that lowproductivity means more workers are needed to produce the
output demanded, she stated. Sheexpects productivity to pick up in the
medium term though.
Demand worries continue to haunt gold and
speculative buying is taking a backseat. Goldspeculators and large
futures traders continued to decrease their gold bullish bets lastweek
for a sixth consecutive week and brought the overall bullish level to
its lowestpoint since November, according to the latest Commitment of
Traders (COT) data released bythe Commodity Futures Trading Commission
(CFTC) on Friday. The non-commercial futurescontracts of
Comex gold
futures, traded by large speculators and hedge funds, totaled anet
position of 81,892 contracts in the data reported through March 10th.
This was aweekly change of -33,928 contracts from the previous week’s
total of 115,820 netcontracts that was registered on March 3rd.
