Commodity World Wednesday, June 19, 2014 …

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MCX Gold Aug 2014

Gold settled at 26839 below the highest level in three weeks before the US Fed concludes a two-day policy meeting today, while investors weighed tensions in Iraq and Ukraine. Gold halted it’s rally in 2013 on speculation that the Fed will scale back stimulus put in place to fuel growth.

The FOMC cut asset purchases at each of the past four meetings as the economy improved. The central bank will probably raise its benchmark interest rate faster than money-market investors forecast. The Fed began a two-day meeting Tuesday. When it wraps up, many market expect the Fed to announce another $10 billion cut to its bond buying program, trimming its monthly purchases to $35 billion.

Gold prices have slumped 8 percent over the past year as the Fed has scaled back its effort. Traders expect interest rates to creep higher, weakening the appeal of gold as an investment. While SPDR Gold Trust, said its holdings fell 0.26 tonnes to 782.62 tonnes on Tuesday – a second straight day of declines. The fund, considered a proxy for investor sentiment, posted its biggest outflow since mid April on Monday.

Also in the physical markets, gold premiums in India, fell to their lowest in four months as the central bank allowed private companies to import gold even as demand was soft. Investors also looked ahead to the outcome of the upcoming Federal Reserve policy meeting on Wednesday, as they await fresh indications on the timing of possible interest rates increases.

Technically market is under fresh buying as market has witnessed gain in open interest by 0.57% to settled at 8707 while prices up 8 rupee, now Gold is getting support at 26624 and below same could see a test of 26410 level, And resistance is now likely to be seen at 26978, a move above could see prices testing 27118.

MCX Silver Jul 2014

Silver settled up 0.40% at 42374 eased slightly from the day’s high in mild profit taking with the focus on the upcoming Federal Reserve announcement. Overnight, the U.S. Labor Department reported that the U.S. CPI rose 2.1% on year in May and rose 0.4% from April. It was the fastest increase in annual inflation since October 2008, which sparked demand for the greenback.

Market expectations had been for an annual increase of 2.0% and a monthly rise of 0.2%. Firming inflation rates should prompt the Fed to continue winding down its monthly bond-buying program and later raise benchmark interest rates from current record lows as the economy gains steam.

The Fed will conclude a two-day policy meeting on Wednesday, and the U.S. central bank is seen scaling back its asset-purchasing program by another $10 billion, though hikes to benchmark interest rates won’t come until sometime in 2015. Fed asset purchases aim to spur recovery by suppressing long-term interest rates, weakening the dollar as a side effect, which boosts bullion’s appeal as a hedge.

A separate report showed that both U.S. housing starts and building permits fell in May, pointing to underlying weakness in the housing sector. Investors now looked ahead to the outcome of the upcoming Federal Reserve policy meeting on Wednesday, as they await fresh indications on the timing of possible interest rates increases.

Technically market is under short covering as market has witnessed drop in open interest by -6.03% to settled at 8854 while prices up 170 rupee, now Silver is getting support at 41944 and below same could see a test of 41514 level, And resistance is now likely to be seen at 42626, a move above could see prices testing 42878.

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