Fed rate decision to provide further direction to gold
By VIVEK GUPTA, CAPITALVIA GLOBAL RESEARCH
Last week, MCX Gold February futures started the week with mixed note and made the high of Rs 25,477 as consumer prices in China changed to a bit higher than expected, increasing the hope for higher demand, but after the Chines data, gold follow its primary down trend due to next week's critical Federal Reserve meeting is in focus, where the US central bank is expected to raise short-term interest rates for the first time in nearly a decade. COMEX Gold prices followed its negative trend for whole week and broke the important support level of $1066 per ounce and tested the level of $1062 per ounce downside due to weakness in the US dollar coupled with the expectation that the Fed will raise interest rates in its December 15-16 meeting. The FOMC's benchmark rate, has remained between zero and 0.25% at every Fed meeting from last December, 2008, after the outbreak of the Financial Crisis. The FOMC has also never approved a rate hike for more than nine years since its met in June, 2006. Gold has remained steady over the last three sessions in cautious trade, as investors await for next week's key monetary policy decision from the FOMC. A majority of FOMC members, including Fed chair Janet Yellen have sent strong indications that the Fed will raise rates at the meeting, as headwinds restraining economic growth continue to fade and the labor market nears maximum employment. Last Friday, the US Labour Department said in a relatively positive report that non farm payrolls in November increased by 211,000 while the unemployment rate remained unchanged at 5.0 per cent. Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, decreased by 4.17 tonnes to 634.63 tonnes, with the overall loss of 0.65 per cent on weekly basis, till Thursday. Silver MCX March futures started the week with negative note and broke the psychological support level of Rs 34,000 and manage to sustain around this level. COMEX Silver also witnessed negative movement and broke the major support level of $14.00 and managed to sustain around this level. On domestic front, the scheme launched by Indian Government to allow monetization of gold has attracted less interest and now government is pushing temples through banks to hand over their treasures. India is trying to influence rich temples to deposit some of their gold stocks with banks to revive a plan to recycle tonnes of the precious metal and cut gold imports. Even one of the most popular temples may soon make the first substantial contribution to Prime Minister Narendra Modi's plan to recycle tonnes of idle bullion to reduce imports and the country's current account deficit. Mumbai's two-century-old Shree Siddhivinayak temple is considering depositing some of its gold with banks. This week we can expect bearish movement in Gold MCX Feb futures & it can test the levels of Rs. 25100/ 24800 on downside till the end of week. Similarly Silver MCX March futures can test the levels of Rs. 33500/ 32800 on downside during the week. For this week, major U.S. data such as CPI, Core CPI, Building Permit, FOMC Economic Projections, FOMC Statement, Philly Fed Manufacturing Index Unemployment Claims, coupled with major even i.e. Federal Funds Rate & FOMC Press Conference will further provide direction to the bullion.