Gold Rallies While Copper Hits 2014 Low

Gold climbed by almost $11.00 in Asian trading this morning to hit 1357.60 a new 2014 high as tensions in the Ukraine continue to stress markets. Gold has been rising continuously since beginning of the year 2014 from $1200 to $1355 so at any point in time prices may take a smart downward correction.

Looking at the economic data, there are many releases from the US and euro-zone and traders can expect them to be remain mostly in line with the expectation. In this regard price action could be lower. Prices are trading in a confined range but the volumes have been much higher in last three weeks indicating there could be good price movement in the coming week. With Ukraine being the major risk against a downside, if cues from there recede and gold fails to move above $1360 then it may drift down to $1320 and then $1300. Gold is slowly climbing towards the upper resistance level; today will be a decisive day to see if traders can push prices over the 1360 number. Also coming next week, traders will begin to watch the FOMC meeting. In the international markets, traders saw gold prices moving higher yesterday as the markets took positivity amidst the ongoing issues in Ukraine whereas added support came from the recent negative batch of economic data from China. Geo-political issues in Eurasia would be the key factor to be watched for the near-term direction in the bullion segment in the short term, particularly for gold. While the markets lack any major cues from the economic data front from the US and Europe, traders are also gaining optimism from the fact that institutional holdings in the major SPDR gold fund continue to increase and currently stand at the 2014 high around 805 MT.

Gold prices yesterday declined initially with strength in dollar but recovery was seen later and prices managed to close in green with concerns over global economic situation. The US Dollar Index (DX) traded marginally low in yesterday’s trade on the back of upbeat market sentiments in the earlier part of trade. However, rise in risk aversion in market sentiments in the latter part led to rise in demand for the low yielding currency, thereby restricting downside movement in the DX. The currency touched an intra-day high of 79.71 and closed at 79.73 on Tuesday. Kazakhstan’s net gold and foreign currency reserves increased to $25.5 billion on Feb. 28 from $24.0 billion on Jan. 31, central bank data showed on Friday.

Silver followed cues from gold and added 300 points this morning to trade at 21.115. Taking cues from rise in gold prices along with weakness in the DX, silver prices increased around 0.1 percent in yesterday’s trade. However, sharp upside in the prices was capped due to downside in base metals complex coupled with weak market sentiments. The white metal touched an intra-day high of $21.29 and closed at $20.80 in yesterday’s trade.

Copper prices slumped by 3 percent yesterday taking cues from sustained growth concerns in the world’s biggest consumer, China. Additionally, weak trade balance data from Euro Zone along with rise in risk aversion in the markets acted as a negative factor. Further, decline in LME inventories by 2.9 percent to 257,600 tonnes along with favorable industrial and manufacturing data from UK could not restrict sharp downside movement. The red metal touched 2.943 this morning well below its trading range of 3.25. Copper is just the lead of the metals family, with iron ore setting new lows as worries over China stress metal markets.