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Perpetual volatility: Will investors abandon Gold?

24 Jul

mcx gold tradingGold futures are weighing and responding in earnest to the Ben Bernanke Congressional testimony of the last week. While the futures look comfortable in dealing with the anticipation that the Fed would not taper as soon as the markets had thought, lending it some buying appetite, the prospect of a tapering lingers with an uneasy calm.

“There’s still a bit of a thirst for the metal,” Jonathan Barratt, chief executive officer of Barratt’s Bulletin said to Bloomberg.

“Given that Bernanke has already suggested that tapering will only occur when they’re very comfortable with the economic outlook, we’re going to see tapering on the agenda but it’s going to be some time before it actually starts,” he added.

Gold on the Comex for delivery on August 13 was seen trading at $1,338.85/oz, a gain of $4.15 or 0.31% as of 10.05 AM IST.

The multi-billion Dollar question used to be this: When will the US Federal Reserve start to taper? After a series of testimonies this year, the answer looks very much elusive. The Fed could not be blamed on this, because they are doing what that is mandated out of them.

The Fed do own the trigger of shooting the Quantitative Easing measures point-blank. Only thing is that they cannot pull it at their will. In fact, having started this whirlpool of money printing, a genie is out, which is refusing to go into the bottle.

The markets have in effect become QE fetish to such an extent that it would be difficult to pull the trigger on QE execution. Playing to the gallery is imperative in a politicized economy.

Now, the mult-billion Dollar question is if the QE measures would be tapered at all? High profile leadership at PIMCO, world’s biggest institution investing in bond markets, believe that the ultra-loose monetary policy may continue until it is 2016.

That is no walking distance from 2013!

The fact remains that gold futures would see extended periods of volatility as data releases occur every time. The Fed has clubbed the QE measures to a recovery in job markets, housing markets and a moderate and healthy inflation. Each data release in this category, fluctuating as each one is, would take the futures on a roller coaster ride.

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Any negative sign is taken for a point to rally up and any positive sign on economy could be interpreted as a point to rally down in gold. Now imagine that happening all the way to 2016! That is a perfect incentive for investors to abandon gold. Especially when there are other less volatile instruments to conduct trade and make money.

But, at some point in time, all these QE measures would have to be curtailed. That would be the time when markets would see the perfect storm.

Gold rises to 1-month high on weaker US dollar

22 Jul

Gold hit a high of USD 1,314.49 an ounce, its highest since June 20, and stood at USD 1,312.24 by 0024 GMT, up USD 16.50

mcx goldGold jumped more than 1 percent to its highest level in a month on Monday as the US dollar slipped against other currencies, with gains in Japanese bullion futures adding extra support.

Gold hit a high of USD 1,314.49 an ounce, its highest since June 20, and stood at USD 1,312.24 by 0024 GMT, up USD 16.50. Gold last week posted its second weekly gain after the Federal Reserve’s assurance the timing of any tapering in economic stimulus is not set in stone.

US gold rose 1.49 percent to USD 1,312.10 an ounce. The most active June 2014 gold contract on Tokyo Commodity Exchange rose as high as 4,243 yen a gramme, its highest since June 20, because of a weaker yen.

Hedge funds and money managers raised their bullish bets in gold and silver futures and options in the week to July 16, while they trimmed net shorts in copper, a report by the Commodity Futures Trading Commission showed on Friday.

China’s central bank removed controls on bank lending rates, effective Saturday, in a long-awaited move that signals the new leadership’s determination to carry out market-oriented reforms.

SPDR Gold Trust GLD, the world’s largest gold-backed exchange-traded fund, said its holdings fell 0.29 percent to 932.46 tonnes on Friday from 935.17 tonnes on Thursday.

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