Annual positive outlook for gold remains intact
Gold made a new low for the past twelve weeks last Wednesday, as the prospect of an end to US quantitative easing generated heavy selling. The injection of liquidity was the one factor pushing gold prices higher. A recovery in stocks and the hawkish markets pricing in higher Fed fund are further negatives for a commodity that offers no yield.
Jewellers in India called off their three-week-old strike on Saturday, on assurances from Finance Minister Pranab Mukherjee that the government would consider scrapping a budget proposal to levy excise duty on unbranded jewellery. The wedding season is at its peak in India, with Akshaya Tritiya, one of the biggest gold buying festivals later in the month, making the period crucial for jewellers. To put the impact of the strike in perspective these merchants sell more gold than the US and Australian mines can produce in a year.
Technically, the market is above the 1607 trend of higher lows from October 2008 and at the end of Thursday’s trading, $45’s above the pivotal 34 week moving average.
Further losses may occur in the beginning of the coming week, but once these supports hold up, this year’s positive outlook for gold will remain intact. On renewed buying, gains above 1670, this week’s open and 1696, last week’s high, are needed to set the precious metal back on a course to February’s high at 1790.
