Breakout in Gold

Breakout in Gold

Gold Closes Above $400, $46 Oil!, Calm Before The Storm!

The monetary model of oil prices that uses the ratio between gold and oil suggests that an ounce of gold bought seventeen barrels of oil, on average.

17 barrels of oil times today’s price of $46 comes to a total of $782, or what gold should be per ounce according to his ratio formula.

Isn't it about time you started looking at commodities seriously!

Gold Breaks Out!
Gold breaks out of its descending triangle pattern.
After a Five month consolidation, Gold should make a move to test its previous top of 430.00. Initial levels to look out for are its previous high of 409.00

See attached chart!

Attached Images

gold20040818.gif (18.5 KB, 35 views)

How do we go about trading gold futures in India?

You can trade gold through any commodity trading futures broker.

The two main commodity exchanges in India are:

Multi Commodity Exchange of India Limited (MCX) and

National Commodity & Derivatives Exchange Limited (NCDEX)

About Precious Metals : Gold

The collapse of equity markets and the arrival of low interest rates have increased the investor presence in alternative investments such as gold. In India, gold has traditionally played a multi-faceted role. Apart from being used for adornment purpose, it has also served as an asset of the last resort and a hedge against inflation and currency depreciation. But most importantly, it has most often been treated as an investment.

Gold supply primarily comes from mine production, official sector sales of global central banks, old gold scrap and net disinvestments of invested gold. Out of the total supply of 3870 tons last year, 66% was from mine production, 20 % from old gold scrap and 14% from official sector sales. Demand globally emanates from fabrication (jewellery and other fabrication), Bar hoarding, Net producer hedging and Implied investment.

Gold continues to occupy a prominent part in rural Indian economy and a significant part of the rural credit market revolves around bullion as security. India is the largest consumer of gold in the world accounting for more than 23% of the total world demand annually. According to unofficial estimates, India has more than 13,000 tonnes of hoarded gold, which translates to around Rs 6,50,000 crore. Inspite of its predominant position, especially in the gold market where India is the largest importer, India has traditionally been a price seeker in the global bullion market.

Bullion trading in India received a major fillip. Following the changes in the Gold Policy announced by the Government of India, in 1997 under export-import Policy 1997-2002. As per the policy, scheduled commercial banks are authorized by the Reserve Bank of India (RBI) to import gold and silver for sale in domestic market without an Import license or surrendering the Special Import License (SIL). Bullion is imported into India by banks and four designated trading agencies acting as canalizing agents and consignees for overseas suppliers, who in turn sell to domestic wholesale traders, fabricators, etc. The price risk is borne either by the fabricator or the retail consumer. The wholesale traders, fabricators and investors do not have any effective tool to hedge their price risk in gold / silver.

You can download more info from http://www.ncdex.com/knowledge/pdfs/bullion_english.pdf

Gold Futures Contract Specifications

Unit of trading 100 gm
Delivery unit 1 kg
Quotation/Base Value Rs per 10 gms of Gold with 999.9 fineness (called “Pure Gold“ in trade circles)
Tick size 5 paisa
Price band Limit 10%. Limits will not apply if the limit is reached during final 30 minutes of trading
Quality specification Not less than 995 fineness bearing a serial number and identifying stamp of a refiner approved by NCDEX.
Quantity Variation None
No. of active contracts At any date, 3 concurrent month contracts will be active. There will be a total of twelve month contracts in a year
Delivery center Mumbai
Opening Date Trading in any contract month will open on the 21st day of the month, 3 months prior to the contract month i.e. January 2004 contract opens on 21st October 2003
Due date 20th day of the delivery month, if 20th happens to be a holiday then previous working day
Position limits Member-wise: Max (Rs 200 crore, 15% of Open Interest)
Client-wise: Max (Rs 100 crore, 10% of Open Interest)
Premium / Discount The discount will be given for the fineness below 999.9. The settlement price for less than 999.9 fineness will be calculated as: (Actual fineness / 999.9) *Settlement price

If you had followed my previous post on Gold, I am sure by now you must be sitting on a sizeable profit.

Golds looks to be ready for the next bull run after a minor corrective period over the past two months. The recent sell off in the gold stocks appears to have run its course and the next upside move should be dynamic. The gold price recently hit $425 and then reacted sharply back to $410. I believe that this was the last repulsion from the critical $430 resistance level. I do not expect to have a major resistance blockage at $430 but expect to see bullion slice right through this level and then use it as a support level for future movement. Above $430 and every chart watcher in the world will turn bullish on gold, even those who have been calling for a correction to $360.

The precious metal shares are ready for a serious upside run through to the New Year. Even the underperforming platinums should join in the celebrations.

I believe that the bullion price has accomplished all the work needed to break above the long 15 year resistance at $430. I am looking for it to slice above this level like a hot knife through butter. The base has been built and has been completed, now for the start of the real bull market in precious metals. This is the stage when suddenly every one turns bullish and it becomes a media event.

All the technical data continue to confirm that the precious metals and their related stocks will keep on out performing US and global general equities. Stay in gold and silver. Do not be off put by the sudden surges and reactions, this is all part of the volatile precious metal arena.

Attached is the daily chart of Gold in INR.

Attached Images

	gold20041026.gif (16.4 KB, 16 views)
	gold20041026-1.gif (11.5 KB, 13 views)

Trading picks,
Totally agree.......have been trading Gold from 330 levels following the weekly charts.Very bullish,both gold and silver!The 430 levels in Gold will be taken out very soon.

Gold new highs today at 432.50.

Good Call tradingpicks.

I am a regular trader in Gold futures and follow your posts with keen interest.

Keep it up!!