Wednesday 17 April 2013

MCX Gold At Down Trend

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One of the main reasons for the recent correction in global gold prices is the confidence in the US economy that has led to investors shifting money from safe havens like gold to riskier assets like stocks. The US stock markets are currently trading at all-time high levels. At the same time, the holdings of the SPDR Gold Shares, the largest gold ETF in the world, have fallen 15% from their peak levels. At 1,154 tonne, SPDR’s gold holdings are at their lowest level since April 2010 

• The rise of the dollar due to the economic crisis in Europe also resulted in prices being adjusted as it is denominated in US dollar terms. The dollar has also moved up on hopes that the US economy is emerging from its crises 

 • Expectations of the US Fed withdrawing the stimulus soon, which would results in sussing of easy money that is currently available 

 • News flow of Cyprus selling its gold reserve. Cyprus holds just 13.9 tonnes of gold. Speculation that Portugal and Italy may follow Cyprus in selling gold added to the negative sentiments. However, it is unlikely that Portugal and Italy will resort to gold selling to meet the fiscal deficit 

 • The sell-off was seen across commodities including metals and crude oil prices as weak Chinese GDP raised concerns over demand

 • The news flows, as mentioned above, led to panic selling and speculative or hot money, which was chasing the rising metal got reversed.

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