For this week, technically gold is looking weak on charts: Vivek Gupta

Updated: Sep 16 2014, 16:52pm hrs
GoldIn international market, U.S. Gold witnessed its worst week since May and trading near 7-1/2 months low. (AP)
MCX Gold witnessed bearish movement for the entire last week with the overall loss of more than 1.5% on weekly basis taking cues from international market. Leading speculation that U.S. Federal Reserve may raise interest rates sooner than expected due encouraging economic data, stronger U.S. dollar & easing tensions in Ukraine curbed the safe-haven appeal of yellow metal and supported the bearish movement in gold. Gold broke its major psychological support level of 27000 during last week & managed to close below the same. Gold is still sustaining near to its 3 months low & prices may continue to fall as investors are focusing Federal Reserves meeting to be held on September 17-18.

In international market, U.S. Gold witnessed its worst week since May and trading near 7-1/2 months low. However Gold holding in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, have risen to 788.40 with the overall weekly gain of 0.3 percent till Thursday. U.S. Silver also headed for a loss for the eighth week out of nine & trading near to its 16 months low. The Dollar index is hovering around 14 month high indicating that the economic growth in the US is gaining traction exerting downside pressure on gold prices.

Recent fall in Gold prices has weaken the confidence of Indian traders and investors in the precious metal as a store of value and dented demand in the world's second-biggest buyer. India's investment demand for gold slumped by 67 percent in the June quarter from a year ago to 49.6 tonnes, World Gold Council (WGC) data showed. As per WGC estimates and industry demand, investment demand could nearly to 190 tonnes this year. Indian gold exchange-traded funds (Gold ETF's), have suffered 15 straight months of outflows. For this week, further we can expect lack of physical demand in India as Indian consider Shraaddha-Paksha as an inauspicious period for buying bullions which will continue till 24 September. Continuous rise in Indian equity market also dragged attention of traders and investors which resulted into withdrawal of their investments from bullion to invest into equities on expectation of quick & better returns.

Silver tracked the bearish trend of gold. Retail consumption of silver has dropped mainly in China and India. Average import of silver in India from April 2014 to July 2014 has also dropped. Weak demand and sustained expectation that, prices of silver would further come down has resulted into limited physical trading in silver by traders and investors. Delayed and below normal monsoon in most part of the country also add to bearish trend of the metal.

For this week, technically Gold is looking weak on charts. Last week, MCX Gold October futures started on weak note and continued its bearish trend for the entire week. For this week, we can expect some recovery during initial days of the week in MCX Gold October futures due to short covering from lower levels and it can test the levels of 27100 - 27150 on the higher side but in the later part of the week, it may again continue its bearish movement and can test the levels of 26700 26650 till the end of the week.

Similarly last week, MCX Silver December futures also started on weak note and continued its bearish trend for entire week. Last week it managed to sustain below the psychological 42000 and fell till its next psychological support level of 41000. For this week, MCX Silver December futures can recover from lower levels and test the levels of 41200 - 41400 on the higher side but in the later part of the week, it can again continue its bearish trend and test the level of 40500 40200 till the end of the week. For this week, major U.S. data like FOMC Economic projections and statement, Unemployment claims and Philly fed manufacturing data will further provide direction to the bullions.

By Vivek Gupta, CMT Director Research, CapitalVia Global Research Limited.