Gold, silver soar as $ falls, crude rises

GOLD and silver moved by over 5% this week due to physical demand, fall in US dollar against major currencies and increase in the crude oil prices. Gold October contract on Comex division of New York Mercantile Exchange closed up 5.23% at $833 per ounce against previous week. Silver September contract on Comex closed up 5.1% at $13.59 per ounce against previous week. Locally on MCX gold October contract closed up 3.76% at Rs 11,681 per 10 grams against the previous week making a high of 11,865. Silver September contract on MCX closed up by 3.49% at Rs 20,009 per kg before making a high at Rs 20,590. Physical demand from India and other consuming countries and a shortage of American Eagle bullion coins due to soaring demand supported the gold prices. Even the dollar which was down 1.2% this week against the euro supported commodity prices including crude oil. Crude oil prices also increased on speculation that rising tensions between the US and Russia may disrupt supply. Going forward, Subodh Gupta from Anand Rathi Commodities feels that one important point to look at is the money flow into gold. He said that despite gold rising fund managers continue to liquidate their long positions in gold. “We expect gold prices to resume its bearish trend for the coming week with prices expected to touch previous lows of $772. Possible breach of this level will lead to prices coming down to $750 in coming days,” Mr Gupta added. The critical indicators which may affect gold prices include US home sales data and the minutes of Federal Open Market Committee meeting which will give further direction on the policy of Federal Reserve in coming days. However a research report from Angel Commodities is bullish on the precious metals if oil prices move up and dollar weakens. “Fundamentals are supportive for precious metals with rising geopolictical risk, deepening worries about the financial sector. Gold prices can trade between $800 and $850 per ounce in coming weeks,” the report adds. Physical demand from India and Middle East countries is expected to rise in coming months. “This can lead to short term supply shortages and sharp rise in gold and silver prices in coming months,” the report said.