Gold Fundamental & Technical Outlook : Neal Bhai


GSR-524856Gold Market Outlook and Fundamental Analysis: During the month of January 2014, gold prices traded in an upward trajectory and ended the month with first monthly climb since August 2013 as declining equity markets across the globe boosted the safe haven demand of gold. Demand for Gold as a haven asset has been renewed after data from China, US and UK, particularly in the manufacturing sector, showed that growth in the world economies has slowed. This resulted in a selloff in the equities market besides some of the currencies weakening. With the US Federal Reserve deciding to pare its stimulus programme to $65 billion a month from next month, also prompting investors to look at gold to hedge their risks.

Gold prices got support from falling equity markets across the globe on safe haven buying as the MSCI All country World Index of equities fell sharply on concern that a rout in emerging markets may worsen. Central Bank rate increase in Turkey, India and South Africa last week failed to contain January’s sell off in the emerging market currencies.

Physical buying across Asia in the month of January 2014 was subdued due to Lunar New Year. While in 2013, Physical demand in Asia helped bullion to rebound from a six month low on Dec. 31, when prices capped the biggest annual drop since 1981.During the month of January, MCX Gold April 2014 contract witnessed a gain of almost 5.96 percent as tested a high of 29256/10 gms on 27th January 2014 from a low of 27609/10 gms on 1st January 2014. Comex gold for immediate delivery rose to test a high of 1279.80/oz on 27th January 2014 from a low of 1202.50/oz on 1st January 2014.

Last week, investment to the tune of $44 million has been invested in gold backed exchange products, according to ETF securities, which sees gold gaining in view of foreign investors cashing out of merging markets. Holdings in SPDR Trust, the world biggest gold backed exchange traded fund rose to 793.16 tonnes. Gold ETF like SPDR Gold Trust took a big hit in 2013. Gold ETFs saw record outflows in 2013, $19.6 billion in the second quarter and $4.2 billion in the next. The peak was reached in April as outflows touched $8.7 billion. Among its peers, SPDR Gold Trust (ETF) turned in a much worse performance. Investors pulled out $25.1 billion in 2013.
The second quarter saw redemptions of $11.6 billion followed by $2.6 billion in the third and $4.3 billion in the last quarter.

It is expected that the global equity markets may likely see more turbulence in days to come which may help gold prices to rally further from current levels. In the Indian market, any drop in the rupee against the dollar will make import of gold costlier hence support gold prices further in physical and futures market.

Technical Outlook :- In the month of January 2014 we have seen sharp upside movement on the Comex browser Comex gold recover from the 15 month low.

On the weekly chart Comex gold is forming double bottom chart pattern, which is reversal chart pattern. Comex gold having strong support around $1170, a trade below said level than bearish trend will confirm.

MCX Gold February contract prices are trading with a positive bias with support comes at 29200 and resistance is at 29900. We expect prices to consolidate between the said range while a break out break down will set further direction in Gold. A break below 29200 may lead prices to 28800 and 28300 levels.

It’s having Fibonacci support at 29200, which is 38.2% of the range, 28140-29900 levels. On breach and sustain below is likely to test 28800 levels which is 61.2% of the above mention ranges.

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