Gold survives a tough week

With the Swiss referendum over, all eyes are now on the US Fed

The strong US jobs market numbers on Friday saw gold shed some of its gains. After holding its ground above $1,200 levels through most of the week, gold price slid to $1,192/ounce on Friday, closing the week with a 2 per cent gain.

Gold closed in positive territory for the week, despite negative news flows, starting with the ‘no’ vote in Switzerland's gold referendum. After making a gap down opening on Monday, gold recovered smartly and closed the day with a gain of 3.8 per cent. This shows that there are large buyers waiting to jump in below $1,200 levels.

SPDR Gold Trust, the largest gold-backed exchange-traded fund, saw its holdings go up by 3.28 tonnes to 720.91. Buying in the physical market in China is reported to have been steady last week, with the premium at around $2/ounce.

Silver ended the week at $16.29/ounce, up over 5 per cent. Platinum closed at $1,223/ounce, up 2 per cent.

Data from the US Labour Department on Friday showed that the country added 3,21,000 new jobs in November, the highest in any month in the last three years. The average hourly wages for ordinary workers was double the anticipated increase of 0.2 per cent. This should be negative for gold.

Cues to watch

However, all eyes are now on whether the Fed will bite the bullet when it meets next on December 16. Economists feel that the stage is all set for a rate hike, with the job market turning around. So, it looks like the dollar rally may continue unless it gives in to technical barriers at 90 levels. If the dollar continues to rise, gold may find it difficult to sustain gains. The blockbuster jobs data last week saw the US dollar index rally sharply to 89.46 — its first move above 89 since 2009. So, tread with caution on your long positions on gold, and also keep an eye on oil prices. A continued slump in oil prices will see gold’s demand as an inflation hedge fall and weigh on prices.

This week, there are no big data releases expected from the US. On Thursday, the jobless claims number and retail sales data is expected. On Friday, the Producer Price Index number will be announced by the Bureau of Labour Statistics, which will indicate what the inflation was at the consumer level in November.

On charts

Gold has a floor at $1,200 levels. Every time it breaks below this level, it fails to remain there for long. Bulls have to watch out for $1,130 on the downside and $1,250-1,260 on the upside. A fall below $1,130 in the short term will signal the beginning of a downtrend. However, if it manages to move past $1,260 levels, there are possibilities for further upsides.

Indian gold futures

With the 80:20 rule on gold imports scrapped, there are now rumours that the Government may also lower the import duty on gold. However, this is unlikely to happen before the Budget next year. The Indian Government will not be in a hurry to free gold imports in spite of significant savings on the oil front.

Gold futures contracts on the MCX closed the week at ₹26,357, up over 2 per cent. MCX Silver closed at ₹36,230, up about 5 per cent. The rupee strengthened against the dollar, moving to 61.78 from 62.03 in the previous week. While the Indian currency looks stable, it can trend lower given strong momentum in the dollar. If the rupee weakens against the dollar, it can provide some upside to gold investors in India. As highlighted, MCX Gold hit the support at ₹25,500 and moved down towards the target of ₹25,300 last week. From there, however, it crawled up to hit the upside target at ₹26,500. This week, the contract may move up further towards ₹27,000 if it manages to break the resistance at ₹26,500. On the downside, the support is at ₹25,800 for a target of ₹25,500.

MCX Silver has shown good resilience last week by bouncing back swiftly from its lows. This week, it may continue its uptrend. The contract has resistance at ₹37,000. If it moves past ₹37,000, it can hit ₹38,700. On the downside, the first support is at ₹36,000 and the next support at ₹32,600.

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