Last Updated : 13 April 2013 at 11:35 IST
Though the markets have been expecting a bearish trend playing out in gold, yesterday's blood bath was outrageous, akin to butchery.
“Catastrophic”, said Kishore Narne, Associate Director Head - Commodity & Currency,Motilal Oswal Commodity Broker Pvt Ltd. “Shocking” said Kunal Shah, Head of Research, Commodities, Nirmal Bang.
With investors moving money out of gold and silver, the futures tumbled at a breathtaking speed on Friday night. Gold futures for delivery on June 13 closed at $1482.65 registering a loss of $82.25 or 5.26%. Silver for delivery on May 13 closed at $25.915 a loss of $1.782 or 6.43%.
“Investors were rushing to sell gold; earlier when the bull rally was on, investors were rushing to buy gold. The opposite is happening,” said Kunal Shah.
“The bull run has been prevailing for over a decade. Now, at the first instance of a signal that the rally is fading, people are rushing out to sell gold. Investors are panicking.” he added.
“The scale and magnitude of the loss gave a shock to investors,” he pointed out.
“I expect a bounce back in gold and silver in the coming days,” he said. “I am not saying that I am bullish, but I expect a bounce back,” he added.
Kishore Narne of Motilal Oswal is also bearish on gold.
“A bounce back in gold cannot be ruled out short term; however I am bearish and I expect Comex prices to go down to $1280 and MCX prices to go down to Rs.26000 by December.” he said.
Further, stop loss triggers too played a role, it seems. Other reasons that ushered in the mishap are:
--Investors were taking money out of gold and silver notwithstanding the dip in US retail sales data released yesterday that also took equities down. Safe haven demand in gold has virtually been wiped away.
--The news that Cyprus would carry out sales of its gold assets spurred speculation that other countries in Eurozone too would follow suite thereby increasing the supply of gold in physical markets.
--Coming out with year-end targets of $1,450 a troy ounce in 2013 and $1,270 in 2014, prominent financial institution Goldman Sachs said and was reported by the Financial Times that: “We see risks to current prices as skewed to the downside as we move through 2013,” adding that “the fall in prices could end up being faster and larger than our forecast”.
--Dollar climbed 0.5% against Euro on Friday even as S&P Index hit an all time record Thursday.
--SPDR Gold Trust saw its holdings dip to 1,181.4 metric tons Thursday, the lowest in almost three years adding to negative sentiments.
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