Gold Holds Up Above Rs 26500 On MCX - India

Mumbai-India (Sept 24)  Modest declines in US stocks in overnight trades supported gold. However, the metalremained locked in a sideways trend today as declines over previous two sessions werefollowed by steady bargain buying though the gains were limited. Global investors remainskeptical about the Chinese economic scenario but recent declines are triggering goodvalue buying as well. COMEX Gold witnessed good buying around lows near $1120 per ounceand extended these gains today as well. Asian equities are mostly in red and COMEX Gold isquoting around $1136 per ounce, up 0.40% on the day. MCX Gold futures witnessed a goodbuying as strong gold import figures boosted sentiments and the counter edged up near Rs26500 mark yesterday. The counter gained further today amid continued buying support andcurrently quotes at Rs 26544 per 10 grams, up 0.29% on the day.

Local gold futures are also expected to eye the undertone in Indian Rupee. The INR isholding up around 66 per US dollar mark. A lower proportion of companies were optimisticabout the current business environment in September as subdued foreign demand and a sharpdepreciation in the rupee offset the positive impact of lower inflation on businesssentiment. The MNI India Business Sentiment Indicator, a gauge of current sentiment amongBSE-listed companies, fell to 61.4 in September from 62.3 in August. Confidence has nowdeclined for three consecutive months, wiping out the gains made in June on the back ofthe rate cut by the Reserve Bank of India and leaving the indicator 13.8% down on the yearand 4.4% below the level seen at the start of 2015.

Gold speculator and large futures traders sharply reduced their gold bullish positionsfor a second straight week last week to the lowest level in five weeks, according to thelatest Commitment of Traders (COT) data released by the Commodity Futures TradingCommission (CFTC) on Friday. The non-commercial futures contracts of Comex gold futures,traded by large speculators and hedge funds, totaled a net position of +39,547 contractsin the data reported through September 15th. This was a weekly change of -19,746 contractsfrom the previous week’s total of +59,293 net contracts that was registered onSeptember 8th.

The drop in the weekly net speculator positions was due to a fall in the weekly bullishpositions by -9,390 contracts that combined with a gain in the weekly bearish positions by10,356 contracts. In the commercial positions for gold on the week, the commercials(hedgers or traders engaged in buying and selling for business purposes) decreased theiroverall bearish positions for a second week to a net total position of -32,979 contractsthrough September 15th. This was a weekly change of +23,000 contracts.

India's gold imports surged 156% on year to Rs 32261 crores in August 2015. Silverimports also surged to Rs 2364 crores, up 58.40% on year. The demand from the retailparticipants is likely to increase in coming days as festive season approaches. Local spottraders have already seen prices witness good buying support under Rs 25000 mark, whichwas the lowest level for the commodity in three years. COMEX Gold futures had tested a onemonth low just under $1100 per ounce before their recent spurt. However, the counter islikely to face some resistance around its 100 day Exponential Moving Average (EMA),currently placed around 1146 mark in coming days.

Source: IIFL