GOLD MONTHLY UPDATES 05.07.2012

Market Outlook and Fundamental Analysis:


Gold:

Precious metals prices didn’t do much on a monthly scale

even though there were many events and news items that

shifted gold and silver from gains to losses with an unclear

trend.

FOMC decision to extend operation twist and the recent EU

Summit decision to bailout EU banks and tighten the

supervision on them, pulled gold and silver in different

directions. The recent rally of Euro/USD has also played a role

in the recovery of bullion by the end of the month.

Gold and silver zigzagged during June with an unclear trend,

even though by the end of the month both precious metals

have made a big comeback along with the rest of the markets.

During the month, gold rose by 2.56%; silver, unlike gold,

edged down by 0.52%.

Here are several factors that may have contributed to the

decline of gold and silver prices during June:

1. The FOMC decision to extend operation twist

throughout the rest of 2012; this means no QE3 for

now;

2. The concerns over Spanish debt crisis;

3. The testimony of Bernanke on June 8th in which he

cooled down the speculations around another QE

program;

4. The deprecation in major currencies including Euro,

Aussie dollar during parts of the month;

5. The positive news from the U.S economy mainly in

the housing market;

Here are several factors that may have contributed to the rise

of gold and silver during the month:

1. The renewed confidence in the EU after the EU

leaders had decided to offer struggling banks loans

from the rescue fund so that countries such as Spain

won’t have to raise money to bail banks (see below

for more);

2. The rise of the Euro/USD during the first part of the

month;

3. The U.S labor report of June showed a modest gain in

U.S. employment of only 69k; this report is usually

negatively correlated with gold and silver prices (see

below);

4. The ongoing FOMC pledge to keep rates low until

late 2014;
 
5. The news regarding the contraction in the U.S Philly


Fed Index;

6. The U.S. federal deficit expanded by 124 billion

during May 2012; this expansion raises a bit the

uncertainty level in the market.

The main events of the month will continue to be around

the FOMC and the EU debt crisis. Supported by the

fundamental factors gold prices can recover if the INR

weakens any further from here on.
 
Gold prices traded in a narrow range during the month of June


and did not show any clarity in the direction. However it can

be owed to the strong support that it faced at a very crucial

level of $1560. After failing to breach this level quite a few

times prices started to rise once again. Supported by the

upward rising RSI prices are expected to move towards the

immediate resistance of $1630 in the international markets.

However in the Indian markets the volatility in the INR is

keeping gold prices away from moving in tandem with the

international prices. Rs 29150 is crucial support level to watch

out for. Prices can sharply rebound from here if supported by

the movement in the Indian currency prices. Prices can move

towards Rs30200 if they fail to breach Rs 29150 in the near

term however a decisive breach of Rs29150 can pull prices

down towards 28300 levels.