Friday, 03 April 2015 18:31

Will Prevailing High Gold Prices Sustain?

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Gold spot gained yesterday to $1193.95 on physical buying but fell to $1284.16 today at Asian Markets.

Gold prices may not sustain at the present higher prices. It is always seen that physical buying slows at higher prices. We may see a break in Gold as rally has pushed prices to a month high.

China has ordered small banks to maintain large reserves to overcome cash supply shortfall as the deposit base of these banks is not strong and stable to face default problems. This will lead to increase in cost of borrowing and ultimately hamper metal buying.

At other emerging markets, central banks have increased interest rates to support their currency and fight inflation. This will also likely to fall commodity demand as to hold its stock become costly to traders. Slow growth of emerging economies may keep commodities in low demand.

Yesterday Fed Chairman pledged to continue the tapering program in upcoming meetings. Strong dollar may further reduce demand for precious metals and divert investors towards risky assets like equity.

We are expecting prices to turn down from this level but find support near to $1260.

 

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