COMEX Gold traded below its 1 year low in most part of the week but showed strong downfall on Friday. COMEX Gold is close to erase this year's gain on expectations of higher interest rates as improvement in economy reduces the demand for the metal. The number of individuals filing for initial jobless benefits in the week ending Sept. 27 decreased by 8,000 to 287,000 from the previous weeks revised total of 295,000 acted as catalyst continuation of bearish movement of Gold & Silver in later part of the last week. SPDR Gold Trust, the top gold-backed exchange traded fund and a good proxy for investor sentiment, said its holdings fell 1.19 tonnes on Thursday to 767.47 tonnes, the lowest since December 2008.
Silver prices were more weaker last week as compared to gold . COMEX Silver prices tried to find support around $17.07 $17.30 but due to weak industrial demand for Silver supported the prices to fall and beak its major support level of $17.07. Weak trend in the Asian market, outlook for higher US interest rates and a stronger dollar cut demand for precious metals as hedges against inflation led the silver prices to show bearish movement. MCX Silver hit its 2 year 10 months low and witnessed overall weekly loss of more than 2 percent on weekly basis.
Physical demand of Gold & Silver is also weak as top buyer China away on week long holiday so gold is not expected to get much help from the physical markets. For this week, we can see increase in physical demand of Gold in India as Navratri & Dashehara has ended and festival season is going to begin. Due to coming festive season in India and coming back of China from a week long holiday, gold demands are expected to rise in coming weeks. Lower prices of Gold & Silver in Indian market and coming auspicious (Diwali) moment will play an important role to increase the physical retail demand of precious metals as Indians believe that buying and gifting gold & silver during auspicious moments would bring good fortune. Many traditional investors also look ahead for this opportunity for investment in precious metals on expectation of quick & better returns during auspicious moments. Indian gold prices are taking cues from the international prices which are significantly lower, which may bring down Indian gold prices also.
Technically, Gold is still looking weak on charts. MCX Gold December futures started last week with positive note and showed consolidated movement in most part of the week with overall weekly gain of around 0.6%. For this week, we can expect negative movement in MCX Gold December futures and if it breaks the level of 26500 on downside then it can further test the levels of 26250 and 26000 till the end of week.
Opposite to the gold trading sentiments last week, MCX Silver December futures started on negative note and traded with bearish sentiment for the entire week. Last week Silver prices managed to sustain below the level of 39400 and it breached the level of 38000 in later part of the week then it closed at the level of 37888 with a weekly loss of 3.27 percent as compared to last week closing. For this week, MCX Silver December futures looking weak on charts and expected to show further downside movement. If it manages to sustain below 38300 and breaks the level of 37000 on the downside then it can test the levels of 36500-36200.
For this week, major U.S. data Unemployment Claims, coupled with physical demand in Asian region will further provide direction to the bullion.
By Vivek Gupta, CMT - Director Research, CapitalVia Global Research Ltd.