Gold is likely to keep its shine in both domestic and overseas markets this week, with traders now training their eyes on a fresh batch of economic data from the United States and other major economies. These figures should offer clues on what the U.S. Federal Reserve does next with interest rates. Market participants will be watching the U.S. services PMI, trade numbers and weekly jobless claims especially closely, along with inflation readings out of the euro zone, China, Japan and Germany. Any big global development, or a swing in crude oil prices, could sharpen the volatility in precious metals.
How Gold Fared Last Week
On the Multi Commodity Exchange (MCX), gold futures for August delivery broke a four-week losing run and turned higher. Over the week the contract climbed 3,216 rupees, or 2.2 percent, to close at roughly 1.47 lakh rupees per 10 grams. Pranav Mer, Senior Vice President (Commodity and Currency Research) at JM Financial Services, said gold prices are likely to keep drawing support in both the domestic and international markets.
Silver Steals the Show
The real spark this time came from silver. On the MCX, silver futures for September delivery surged 13,938 rupees, or 6.2 percent, to reach 2.37 lakh rupees per kilogram. Jatin Trivedi, Vice President (Research Analyst, Commodity and Currency) at LKP Securities, said the recovery in gold this week was driven by a weaker U.S. dollar and buying that returned after oversold levels. This, he noted, helped bullion prices rebound after nearly a month of steady weakness. Trivedi added that easing inflation pressure, stability in crude oil prices and remarks from Federal Reserve chief Kevin Warsh have pushed markets to reassess the outlook for U.S. interest rates.
The Picture in Global Markets
The mood abroad also favoured gold. Last week, COMEX gold futures rose 91 dollars, or 2.2 percent, to settle at 4,187.30 dollars per ounce. Silver, meanwhile, gained 3.14 dollars, or 5.3 percent, to touch 62.81 dollars per ounce. Mer pointed out that after several failed attempts to stay below 4,000 dollars per ounce in the international market, gold recovered from its early dip and finished the week on a positive note.
Tensions and Central Bank Buying Lend Support
Renewed tension between Russia and Ukraine also propped up demand for bullion. According to the World Gold Council, central banks added a total of 41 tonnes of gold to their reserves in May. Trivedi said gold has now steadied after finding support near its recent lows. Even so, he cautioned, the metal will remain highly sensitive to shifts in the U.S. dollar, treasury bond yields and the major economic data still to come.
