Gold loosing shine

• Gold traded lower to loose $20 during week from previous weeks closing of $929 where news flows were slightly positive for gold with recession fears creeping in again with higher jobless claims, less than expected U.S. GDP growth, lower non-farm pay rolls increased unemployment rate however Markets were thinking differently after longtime.
• The funds and investors were seen moving their investments from commodities market, on receding oil prices, there by strengthening US dollar against major currencies, which was evident from dollar index, which closed higher compared to previous three weeks indicating intermediate up trend for US dollar in coming days.
• Gold had substantial run in past one year from $600 to $1033 due to sell off in US dollar and high Oil prices which were pushing Gold as best hedge to these adversaries.
• Gold physical demand failed to accelerate; reduced power problem in South African mines is easing output threats.
• Now since Oil is seen correcting despite supply crisis of Nigerian attacks and geopolitical drama involving Iran. attributing to lesser demand anticipation due to recede in growth rate of china and India in coming days , increase in output to combat very high prices and also US government is trying many ways to bring down speculation in Future Contracts measures like even lifting of presidential ban on offshore drilling. Showing there seriousness in that direction
• • Despite the Indicators during the week showing less growth there is light at the end of the tunnel visible for US economy, In past year as dollar eased, due to this off late US exports picked up momentum as US products and services became more appealing and cheaper compared to Euro zone suppliers elsewhere in the World contrary to dollar weakness euro was strengthening they were losing on exports on which they depend more since they have lesser internal consumption this was instrumental in the increase in American export. Also contributing to consumer confidence increase and durable goods order increase were Uncle Sam’s tax rebates of $75 billion.
• Now going by above factors except in case there are any Geopolitical disturbances or Natural calamities Economy should revive in about six months there by reducing appeal to invest in hedge investments. This is substantiated by some buying interest in Dow Jones. Usually stock market investing will start three month prior to end to recession. So now during last one month there appears a good enough buying in US stock market. Aggressive rate cut by Ben Bernanke too contributing here with flush of cheap funds.
• We feel that the Gold which had run up more due to dollar weakening, can re-rate itself on US dollar’s gain in coming weeks and months to at least $800 level once US dollar index reaches 77mark or Euro reaches 1.4850 against US dollar probability of which in next couple of months is on higher side

For feedback or comments –N.Prasad (nprasad2@*****.com)