SMC's special monthly report on Bullions
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In the month of October, bullion counter slumped lower on rise in greenback and fear of rise in interest rate rise coupled reduced safe haven demand.
Overall gold traded in range of 29300-30828 in MCX and $1242-1320 in COMEX. Silver traded in range of $17.11-19.13 in COMEX and 41060-45891 in MCX. India's overseas purchases of gold likely hit a nine-month high in October, as a flip in domestic prices to a premium prompted banks and refiners to resume imports ahead of the festival season.
Demand for gold usually firms in the final quarter as India gears up for the wedding season and festivals. Last month Draghi sounded cautious about the euro zone economy, saying that it was showing “resilience to the adverse effects of global economic and political uncertainty. He repeated his regular call for euro zone governments to make their economies more competitive, and to get more people into work.
He also stated that on implementation of structural reforms needs to be substantially stepped up to reduce structural unemployment and boost potential output growth in the euro area. Structural reforms are necessary in all euro area countries.
In the month of November bullions may continue to remain on volatile path but some short covering can be seen after the recent fall as outcome of US elections and ETF demand will affect its prices. Recently fear of interest rate hike has kept prices under pressure while euro zone concerns and fall in greenback can cap the downside. The gold/silver ratio can move in narrow range of 69-74 in near term. On domestic bourses the movements of local currency rupee will be the key factor to watch out which can move in range of 65.5-67.5 in the month of November. Gold can trade in range of Rs 29500-31500 in MCX and $1225-1325 in COMEX. Silver can trade in range of 42000- 46000 in MCX and $17.20-19.5 in COMEX.
Investors are awaiting further clues from US presidential elections on 8th November. . Fed officials have been suggesting a December rate hike is possible including dovish New York Fed President William Dudley who is closely allied with Fed Chair Janet Yellen. Federal Reserve Bank of San Francisco President John Williams stated that the best time for the U.S. central bank to raise rates again likely will be at its policy gathering in December. The European Central Bank is certain to continue buying bonds beyond its March target and to relax its constraints on the purchases to ensure it finds enough paper to buy.
The US Presidential elections
The political uncertainty surrounding the US Presidential elections is seen as the next big catalyst for prices after the British referendum 2016, which took the financial markets by surprise, but favored gold for its safe haven appeal. If Trump wins the Presidential elections, there will be noticeable changes in American politics. If he is elected, it will arouse uncertainty about the effects of his policies on the US economy .This can offer an upwards thrust to prices. The US Presidential race is a close call, where odds of Trump’s win may be underestimated by the polls, but only time can tell what’s in store.
ETF and physical demand
Following the above-average monsoon in India, we have the ongoing festival and upcoming wedding season and gold demand in India is expected to increase in 2016-17 over the previous September to August crop season. This would help reverse weak second-quarter jewelry demand trend in India, as the current phase of correction would again attract buyers at lower levels. ETFs demand has remained strong and stole the show in H1 2016 as per the WGC, with inflows into the sector at 579.2 metric tonnes in the six-month period, compared with cumulative outflows of 616.1 metric tonnes over the preceding ten quarters.
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- Bullions may remain on volatile path on various uncertainties in October 2016
- Bullions: To remain on volatile path in the month of September
- Way2wealth's Daily Commodity Note
- SMC Commodity Report (Agri)
- SMC Commodity Report (Metals & Energy)
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