Tuesday, April 17, 2018

MARKET OUTLOOK @Capitalstars: Akshaya Tritiya 2018: Has the bull market in gold begun?

Gold demand in India increased 9 percent last year to 727 tonnes and is expected to increase to around 800 tonnes this time around.


Gold is the best hedge against global uncertainty and is in strong demand after the US and its allies UK and France bombed locations in Syria to punish the Assad regime for an apparent chemical weapons attack against civilians.

Pentagon officials said the attacks targeted the heart of Assad's programs to develop and produce chemical weapons.

The attack has heightened tension between Russia and the US and has put the global market at risk after Russian President Vladimir Putin warned on Sunday that further Western attacks on Syria would bring chaos to world affairs.

Speculators will be betting on a rally and they’ll get their expected move if the stock market weakens along with the dollar. This will likely occur if there is an active response to the attack.

Against this backdrop, and seen alongside other uncertainties in the global economic arena, it certainly looks like gold has moved past its worst phase, and hereon, we are going to witness a consolidation phase, alongside strong rallies. Gold’s next bull run could present buying opportunities that could be tapped on every correction.

Economic Indicators that affect gold prices:

Non-farm payroll

Non-farm payrolls in the United States increased by 103,000 in March, following an upwardly revised 326,000 in February. It is the lowest reading since September and well below the market's expectations of 193,000 jobs. Gold prices have rallied after this data was released.

Dollar index

The dollar index, which measures the strength of the US dollar against a basket of six major currencies, is trading at around a three-year low, breaching the important support of 90 and trading below that at the moment.

The weakness in the dollar index is proportionately reflecting the state of the US economy currently, although US markets are trading at a higher level. If it falls below 88 level, it will be perceived as a strong indication for gold prices to rally.

Gold demand

A lot of people desire gold for security and personal wealth but are unable to buy it because it is too expensive. The following are the factors influencing gold prices:

Demand for gold

Gold is considered a token of luck for Indians. No festival or wedding is complete without gold and jewellery in India. And although the metal and its finished products cost a lot, the demand for it has still not come down.

Gold demand in India increased 9 percent last year to 727 tonnes and is expected to increase to around 800 tonnes this time around.

Akshaya Tritiya - a day for gold

The demand for gold in the Indian market is seen buoyant ahead of Akshaya Tritya, the auspicious day, which will offer investors the opportunity to make more money on whatever they buy.

Expectations of a jump in prices to above Rs 33,000 per 10 grams in the near-term and diamond consumers shifting to gold will keep demand for yellow metal robust during Akshaya Tritiya. Indian consumers consider the day an auspicious one to buy gold.

According to official data, jewellers in and around Maharashtra last year marked business of Rs 350 crore, which may rise to Rs 400 crore this time around.

Demand for gold will also rise due to diamond buyers shifting to gold amid speculation over quality issues of the stones.

Price never lies

On the weekly chart, gold prices have given a symmetric triangle breakout and have touched a multi-year high of 31,500, which is a positive indicator.

By considering the above fundamental factors and the technical chart setup for gold, we expect a target of Rs 32,500 in the short term. If prices end the month at over Rs 32,000 per 10 grams, then they could even touch Rs 34,000 levels by the end of the year.




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