US Monetary Policy Related Updates from ECB and Commodity Trading Tips

Commodity Trading TipsGold Commodity Trading In major macro-economic cues during this week, the US Dollar index advanced around 0.75 percent moving to its fresh five year highs near the 90.65 mark. The Greenback jumped on likely positive economic reports from the US coming week whereas speculation increased that Fed might talk about raising interest rates as also anticipated from its monetary policy minutes report due next week. Alongside this, we have the External Commercial Borrowing head Mario Draghi who in a recent statement commented that the bank is preparing to extend its stimulus measures pressing Euro currency lower towards its fresh 2010 lows around 1.2040 while indirectly supporting gains in the US Dollar.

Rising USDX makes a case for subdued investment in Bullion and thus we saw weight continually being maintained over Gold during the past week, notwithstanding the fall in equities broadly. In the coming week, we believe the monthly employment report and the FOMC monetary policy minutes would be watched closely. The Labour department’s report coming Friday might show Jobs addition in the range of 240K+ for December making 2014 average the best since year 1999. Unemployment rate is also expected to slide downward to 5.7 percent as per market estimates meanwhile strengthening the Fed’s view over the economy which continues to mend.

Also, in the week we have the Fed meeting minutes to be released. In its last meeting, the Fed said it would be “patient” on the timing of any interest rate hike against earlier call that it would borrow costs low for a “considerable time.” In case we get further clearer comments or updates from the minutes as on when the FED is actually looking to time the rate hike, we might see good volatility in different asset classes and mainly Gold and USD. Through broader hopefulness about economy seen extending and no surprising negativity expected out of FOMC Minutes; we believe the pressure in gold commodity would continue in coming week as well.

Looking at the other demand variables, recent data from China showed its gold imports from Hong Kong rose to highest level since Feb during Nov month. Higher inflows point towards increase in demand for the world’s major purchaser. On the other hand, we feel we should not go gung-ho with one month’s data as Nov month also saw Gold prices sliding down towards $ 1135 an ounce mark, its 4 and ½ year low which may have prompted pent-up demand ahead of the Lunar New Year. Similarly is the case with India, wherein consumption increased at a good rate in November however high concerns remain whether demand would stay upbeat in coming months as well.

As said earlier, too gold is one such commodity which takes price direction from macro developments rather than its own demand-supply we feel downside risks for the commodity stay in the near-term and next week as we have some important economic cues from US, monetary policy related updates from ECB which should cumulatively keep Bullion underneath pressure. We recommend selling gold on small pullbacks in this week.

Gold Feb MCX futures prices are expected to trade downside for the week ahead. A taut resistance is at 26800 levels, which is likely to hold the negative aspect view. Break below 26200 could lead the drop to extend towards 25800 levels. For short term traders we suggest selling at higher levels

Gold Commodity Trading Weekly View

Resistance on Upside at: 26900-27500

Support on Downside at: 26200-25800

Trend: Down

Silver Commodity Trading on the macro-economic side, the broader movement for the whitish precious metal is likely to be linear with the directional trend in Gold as stated above. Specifically for silver, we believe selling pressure might continue to persist on back of subdued manufacturing cues from China as seen on its PMI and also lately the US ISM reading which increased at a slower than expected rate. Chinese official Man PMI from government slipped in Dec to its lowest in 18 months suggesting further downside risk to the world’s largest industrial consumer and likely to act bearish over industrial metal commodities including silver. We maintain selling stance in the commodity in the coming week and advice building short positions on small pullbacks

Silver March MCX futures prices traded downside in the last week. Prices are expected to trade downside for the week ahead. Key resistance level is seen at 37750 levels, which is expected to hold the downside view. For short term traders we suggest selling at higher levels.

Silver Commodity Trading Weekly View

Resistance on Upside at: 36900-38100

Support on Downside at: 35200-34500

Trend: Down

Commodity Trading Tips

Sell Gold Mcx Feb on rise near 26780 sl 27060 Tgt 26540-26375

Sell Silver Mcx Mar on rise near 36600 sl 37300 Tgt 35900-35000