Spot Gold prices touched a new high of $1,095/oz today and prices on the MCX touched an all-time high of Rs16,677. The latest development of the Reserve Bank of India (RBI) buying 200 tones of gold from the International Monetary Fund (IMF) at $6.8 billion has provided a boost to gold prices. Investment demand for Gold is also expected to rise on the back of higher ETF and HNI demand. This rise in investment demand will help to compensate for the decline in consumer demand for jewelry and fabrication on the back of high Gold prices. What can further add to the upside in Gold prices is the move by Russian and Chinese central banks to purchase the yellow metal. Technically after Gold prices crossed the high of $1,033/oz which was first made in March 2008, prices have continued trading higher. The metal is in a secular bull trend and the dollar index is in a secular bear trend. This further indicates that a weaker dollar could continue to support an upside in gold prices as it makes the metal look attractive for holders of other currencies. Copper prices traded higher, taking cues from the weaker dollar and prices also gained as firm equities and record gold prices gave bullish sentiments in the financial markets. Despite rising inventories in the case of Copper, the red metal is cushioned on the downside by labour worries. The prevailing dispute at BHP Billiton’s Spence mine in Chile is dragging on and shows no signs of being resolved yet. Hence, it will continue to provide upside support to copper prices. Crude Oil prices rose for a third day and gained 1% till 4.30 p.m. IST as weakness in the dollar coupled with economic data reinforced confidence in the global economy. The US Energy Department is expected to release its weekly inventory report which will show that crude oil inventories rose 1.4 million barrels last week. Outlook The US Federal Reserve is expected to end its two-day meeting today and we believe that it will keep interest rates unchanged. The European Central Bank (ECB) and the Bank of England (BOE) are also expected to keep rates unchanged on Thursday. Dollar’s weakness today has provided strength to dollar-denominated commodities and overall bullish sentiment could provide further positive impetus to Gold and Copper prices. Crude oil will take cues from the weekly inventory data which is due to 8.00 p.m. IST. If inventories show rise then oil prices could come under pressure but overall bullish sentiments in the financial markets could help oil prices trade higher. We expect Gold and Copper prices to trade with a positive bias.

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