19
B
ull ion
R
eview
The Month
The yellow metal found support at the beginning of the year.
Gold prices surged by about 7% towards the $1240/oz levels, as
against $1150/oz at the close of the year (2016). Meanwhile, the
uncertainty over President Trump’s policies has led to significant
corrections in the dollar’s strength over the last couple of weeks,
prompting investors and money managers to buy gold. The metal’s
safe haven status has also attracted investment with rising
geo-political risks.
On the other hand, global gold ETFs remained flat to marginally
negative during the last one month despite the price rise. This is
somewhat unusual as gold ETFs maintain a high positive correlation
with gold prices. During the month, the world’s largest Gold ETF,
SPDR Gold ETF’s holdings dropped by 23 tonnes ($0.9 bn) to
803 tonnes.
Gold has been in the thick of action in the last few months both
internationally and in the domestic market. On November 8, 2016,
the announcement of demonetisation apparently led to a spurt in
demand for the precious metals. The rush remained short-lived
Gold Movement in January 2017
however, as scarcity of cash put demand off the market. We get
a sense that the impact of demonetisation is not going to create
any significant upheaval in the domestic bullion industry, and in
fact may help the trade to become more organised in medium to
long term.
Also, the gold trading community was hoping for a reduction in
custom duty for the precious metals in the Union Budget, which
kept domestic demand under check almost all through January.
However, with no custom duty change in the budget, we expect
pent-up demand to follow through in the coming weeks. Prices
in the domestic market are hovering around the
R
29500/10 gm
level and consumption may get affected if prices pierce through
the
R
30,000 mark.
Projection
Gold prices are likely to be driven by US policies and the FED’s
rate hike decision. They look stronger on charts though. However,
one cannot ignore the strong economic indicators coming out of
the US. March hike expectations are off the table now which is
supportive to gold prices. The $1250/oz level is key resistance and
sellers are likely to get active around these levels. We expect the
market to remain volatile in the coming months, and it can surprise
both the bulls and bears by testing the extremes of the range, i.e.,
$1180-1275/oz.
Disclaimer:
This communication is for informational purposes and is not
guaranteed as to accuracy, nor is it a complete statement of the
financial products or markets referred to therein. This is not a
recommendation, offer or solicitation to buy or sell any instrument
pertaining to any asset class including, but not limited to currencies,
interest rates, commodities and equities in underlying market or
any form of derivatives on any of them or a combination of any
of them. Neither HDFC Bank Ltd. (including its group companies)
nor any employees of HDFC Bank Ltd. (including those of its
group companies) accepts any liability arising from the use of this
communication.
Source:- Bloomberg & NCDEX
14-Feb-17
High
Low
USD - 1228.20
1218.10
1152.15
INR - 29074.00
29250.00
27591.00
1100
1120
1140
1160
1180
1200
1220
1240
2-Jan
4-Jan
6-Jan
8-Jan
10-Jan
12-Jan
14-Jan
16-Jan
18-Jan
20-Jan
22-Jan
24-Jan
26-Jan
28-Jan
30-Jan
Gold - USD Per Ounce
