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Commodities Precious Metals

Gold and silver daily review (June 19, 2014)

June 19, 2014, Thursday, 05:42 GMT | 01:42 EST | 10:12 IST | 12:42 SGT
Contributed by Angel Broking


Gold

Gold prices gained on Wednesday as Federal Reserve slashed its forecast of US economic growth appealing bullions safe haven status. It also hinted towards slightly faster pace of interest rate increases next year which the markets ignored, but the possibility of rate hikes will lead to correction in gold prices as gold is a non yielding asset.

After a two-day policy meeting, the central bank slashed its forecast for U.S. economic growth to a range of between 2.1 percent and 2.3 percent from an earlier forecast of around 2.9 percent, but expressed confidence the recovery was largely on track. The Fed also reduced its monthly asset purchases from $45 billion to $35 billion, but suggested rates eventually would be lower than it had indicated previously. A high reading for U.S. inflation on Tuesday raised expectations the Fed might signal a sooner-than-expected rise in interest rates. Tightening rates would also lift the dollar and put pressure on dollar-priced commodities like gold.

On the MCX, gold prices declined marginally by 0.05 percent and closed at Rs.26826/10 gms.


Silver

Spot silver prices on the international markets gained by around 1 percent tracking gains in gold prices. Although the base metals pack largely traded on a negative note, silver prices largely tracked sentiments from the outcome of the Fed’s statement.

On the MCX, silver prices rose marginally by 0.1 percent and closed at Rs.42398/kg.


Outlook

On an intraday basis, we expect bullion prices to trade sideways as Fed’s forecast of downward revisions in US GDP indicates that the economy still lacks momentum although the economy is on a growth trajectory. However, the rise in interest rates in the US at a faster pace than the market expectations will act as a negative factor. On the other hand the situation in Iraq has intensified further as militants take control over the oil fields and the country is in a state of civil war.

On the MCX, gold prices are expected to trade sideways taking cues from international markets.

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