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Commodities » Precious Metals

Gold and silver daily review (September 05, 2014)

September 5, 2014, Friday, 06:10 GMT | 01:10 EST | 10:40 IST | 13:10 SGT
Contributed by Angel Broking


Gold

Spot gold prices declined on Thursday on strength in the dollar index after the European Central Bank cut interest rates to record lows and said it would I aunch an asset purchase program to ward off deflation. U.S. equities driven by strong U.S. services sector activity also decreased bulli on's safe-haven appeal.

ECB President Mario Draghi, speaking at a news conference shortly after the ECB unexpectedly cut already ultra-low interest rates by another 10 basis points, said the central bank would start purchasing securitized loans and covered bonds next month. The ECB is under strong pressure to tackle stubbornly low inflation at a time when the conflict in Ukraine threatens to destabilize the region's fragile recovery.

U.S. nonfarm payrolls data due on Friday is expected to give further clues about the world's largest economy and the timing of the Federal Reserve's move to raise interest rates. Holdings of the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund and a good measure of investor sentiment, fell 2.69 tonnes to 790.51 tonnes on Wednesday.

On the MCX, gold prices declined by 0.4 and closed at Rs.27461/10 gms.


Silver

Spot silver prices also declined by around 0.7 percent in tandem with decline in gold prices. Strength in the dollar index after ECB unexpectedly cut already ultra-low interest rates led to declining speculative interest in the metal.

On the MCX, silver prices declined by 0.7 percent taking cues from weak international markets and closed at Rs.41485/kg.


Outlook

On an intraday basis, we expect gold and silver prices to trade lower as the surprise rate cut by the ECB and additional monetary programme of 700 billion Euros will lead to weakness in the Euro. This in turn will lead to strength in the dollar and weakness in the commodities pack including precious metal. Holdings in the SPDR gold trust are also declining indicating waning interest in the yellow metal.

On the MCX, gold and silver prices are expected to trade on a negative note taking cues from weak international markets.