Precious and Base Metals Continue To Weaken

Precious and Base Metals Continue To Weaken
Precious and Base Metals Continue To Weaken

Gold recovered $1.60 this morning in the Asian session to trade at 1244.10 after declining yesterday. Precious metals fell around 2 percent on Thursday, its biggest one-day drop in more than a month, as a pullback in the U.S. Federal Reserve’s stimulus program and an equities rally on robust U.S. growth data prompted bullion investors to take profits. Gold prices had climbed to the 1260 level as jitters hit the markets over the emerging nation’s economic crisis. Hedge fund managers and money managers closed their positions as gold is looking to decline to the 1200 price level or lower as forecast by several major analysts. SPDR Gold Trust holding fell by 0.6 tons on Thursday.  With the Chinese markets closing for a week for the Lunar holiday there will be little support by physical purchases.

Yesterday, analysts suggested a volatile trend for gold which led us to recommend only momentary trades. Gold prices were highly volatile yesterday as it initially moved higher to $1267 during the Asian and early European session but, in the US trading hours, it declined sharply to $1237 and settled the day at $1242.20. Most of the price action was noticed during the US session post the US GDP data, which stood unchanged at 3.20% while personal consumption improved. Meanwhile, the Fed slashed its asset purchase programme by $10 billion, also supporting a rise in the USD index, the negative impact of which was felt on the euro as well as gold. Silver gained 64 points to trade at 19.19 well below its trading range as precious metals are weak along with base metals.  Most of the base metals at the LME platform declined heading for the worst decline in the month of January since 2010 on the back of weak manufacturing data in China along with the Fed trimming its asset purchase program by another 10$billion to $65 billion.  Copper is trading at 3.218 down by 6 points after its steady decline yesterday. LME Copper fell by 0.4 percent taking cues from sharp decline in pending home sales data from the US, the second biggest consumer. Also, the announcement of QE taper of another $10 billion by the Federal Reserve on Wednesday led to strength in the DX and exerted downside pressure. Further, drop in manufacturing data from China acted as a negative factor.  However, decline in inventories by 0.8 percent to 316,200 tons prevented sharp downside movement in the prices.  No. 1 copper producer Chile produced around 5.8 million tons of the metal last year, a 6.1 percent increase from 2012 levels and a fresh record, the government said on Thursday. Platinum was flat at 1383.45 while palladium drifted down by $1.60 to trade at 705.50.

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