Commodities

Gold and silver daily review (October 22, 2012)

Contributed by Angel Broking

Gold

Spot gold prices declined 1.9 percent week on week due to weak global market sentiments caused by poor U.S. corporate earnings and uncertainty over Spain bailout in the European Central Bank meeting. This caused rise in the risk aversion amongst market participants and thus raised the demand for the low yielding currency that is US Dollar Index in the later part of the week. This exerted downside pressure on the gold prices. Further, unfavorable US home sales data came on a negative note adding to the losses of gold prices.

The yellow metal touched a weekly low of $1,715.79/oz and closed at $1,720.49/oz on Friday. On the MCX, Gold October contract ended on a flat note taking cues from bearishness in the spot gold. However, sharp fall in the prices of Gold on the MCX were cushioned due to depreciation in the Indian Rupee and closed at Rs.31,285/10 gms on Friday after touching a weekly low of Rs. 30,862/ 10gms.

Silver

Spot silver prices declined 4.2 percent taking cues from weakness in the spot gold prices along with bearishness in the base metals. Additionally, strength in the DX also acted as a supportive factor for the downside in the silver prices.

The white metal touched a weekly low of $31.89/oz and closed at $32.02/oz on Friday. In the Indian markets, MCX silver prices fell 2.4 percent tracking bearishness in the spot silver and closed at Rs. 59,872/kg after touched a weekly low of Rs.59,623/kg on Friday. However, depreciation in the Indian rupee cushioned sharp fall in the MCX Silver prices in yesterday's session.

Outlook

In the intraday we expect precious metals to trade with negative bias taking cues from bearish global markets along with strength in the DX. Uncertainty over Spain bailout and no specific steps stated in the meeting to resolve the Euro zone debt crisis are creating bearish market sentiments In the domestic markets however, depreciation in the Indian rupee is expected to cushion sharp fall in the prices.