COM: Gold falls on dollar strength, equity weakness
The bullion pack prices witnessed a sharp fall over the past week on the back of strengthening US Dollar against major currencies. Spot gold hit a low of $1073.30 last week while the Dollar Index hit a high of 79.50.
A stronger dollar puts pressure on the yellow metal and makes it look expensive for holders of other currencies. The dollar is gaining strength as risk aversion in the financial markets coupled with poor investor sentiment has led to higher demand for the low-yielding dollar.
With stricter norms for banks participating in speculative transactions in the offing, lightening of positions is being witnessed across global financial markets, including the commodities markets.
On the Currency front, the Euro continued trade at multi-month lows against the USD on the back of serious financial concerns in some euro-zone nations. All major currencies have been hit hard against the USD. Weak domestic equities markets had a weakening impact on the Rupee last week as well.
The short-term trend for the bullion pack remains down but at the same time, prices are being strongly supported at current levels as technically, these levels are very crucial. It has become a dollar play and any significant appreciation in the US Dollar will impact the bullion prices negatively.
On the other hand, from a long term perspective, inflationary concerns on the back of trillions of dollars being pumped into the global financial system will be a key supportive factor for the bullion pack.
Demand for gold as a traditional safe-haven asset may re-emerge, provided spot gold holds the current support level of $1070 consistently. Any subsequent break below this level would trigger buy stops, further aggravating a sharp decline.
On intraday basis, Spot Gold prices have immediate support at $1073/$1065 whereas resistance is seen at $1088/$1093. Spot Silver prices shall find support at $16.00/$15.70 whereas resistance is seen at $16.35/$16.50.
MCX April Gold has support at 16230/16150 whereas resistance is seen at 16375/16430. MCX Mar Silver shall find support at 25280/25030 whereas resistance is seen at 25670/25830 levels.
