Gold Price Sees Steady Gains Amid Weakness In Equities

September 23, 2015

New Delhi-India (Sept 23)  Gold is holding steady today amid a continued correction in global equities. COMEX Goldfell for a second straight session yesterday as traders continued to trim positions aftera spirited rally post the US FOMC announcement last week. Gold jumped following the statusquo from the Fed though the overall price action this week has been dominated by profitselling. However, the metal seems to be witnessing bargain buying on selling in equities.Global stocks have reversed direction as mounting fears over global economic growth anduncertainty regarding the FOMC policy. COMEX Gold is trading at $1126 per ounce, up 0.11%on the day. MCX Gold futures are trading at Rs 26279 per 10 grams, up 0.16% on the dayafter testing a low under Rs 26200 levels yesterday.

On the global economic front, the Asian Development Bank said Tuesday that developingAsia will grow 5.8% this year instead of the 6.1% projected in July. Likewise, the outlookfor the next year was downgraded to 6% from 6.2%. ADB trimmed its growth outlook fordeveloping Asia, citing slower growth prospects for China and India and a slow recovery inmajor industrial economies. In order to counter the consequences of Federal Reserve's ratehike, the Manila-based lender advised the region to adopt monetary policy that balancebetween stabilizing the financial sector and stimulating domestic demand. China isexpected to grow 6.8% this year, below the government's target of about 7% growth. For2016, growth is estimated to be at 6.7%. In July, the ADB had estimated 7% expansion forChina in 2015 and 6.8%in 2016.

The US Federal Reserve kept interest rates steady last week due to global headwindsthat could slow the economy and keep inflation subdued though the central bank kept alivethe possibility of a hike before the end of the year. The Fed noted that recent globaleconomic and financial developments may restrain economic activity somewhat and are likelyto put further downward pressure on inflation in the near term. The Fed said that thefinancial market turmoil did not change its assessment but added that it was monitoringdevelopments abroad. The Fed also lowered where it believes rates should be in the longerrun to 3.5% from 3.8% three months ago.

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.

Source: IIFL

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