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Prospects of gold hitting Rs 31K per 10 gram fade after strong US data |
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MUMBAI: Chances of gold testing Rs 31,000 per 10 gm in a month receded on Friday as US reported faster than estimated economic growth in the fourth quarter, and as personal income and spending both rose in January. This sparked market concerns of the US Federal Reserve continuing to raise interest rates this year after doing so for the first time in a decade in December.
Friday's data release buoyed the possibility of gold testing the lower end of the band at Rs 26,894 over a month, going by the USD-INR closing on Friday and options data on US-based Comex. However, the equation could change if the government hikes import duty on gold during the Budget for FY17 due to be presented on Monday.
Higher interest rates means a stronger greenback, which is inversely correlated with dollar-denominated gold price.
The front month contract on MCX, which moves in tandem with gold futures on US-based Comex, fell by a percent and a half to Rs 29,337 per 10 gm on Friday. Comex gold fell by a similar extent after the Q4 GDP and other reports.
Till a day before, extrapolation of option trends on Comex strongly pointed to gold testing almost Rs 31,000 in a month. US regulatory data, released on Friday, showed that through the week ended Tuesday speculative shorts trimmed their positions by 11,585 contracts to 91,741. Speculative longs raised bullish wagers by 7,347 contracts to 209,101 contracts. In eight sessions through Thursday, gold futures jumped 2.5% to $1,239. This gave currency to a gold rally to $1,250.
The tables turned on Friday post the GDP data. The price of the $1,250 strike call option expiring in a month fell by a whopping 38% overnight after having risen by 35% in the eight sessions through Thursday. That of the $1,200 strike put rose by 29%, after having fallen 54% through Thursday.
"It looks like for now at least that gold might find climbing to Rs 31,000 abit of a hard row to hoe," said Ketan Shroff, MD, Penta Gold.
Source : economictimes.indiatimes.com
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