Poor non farm leads to radical gains

Gold futures got a boost on the disappointing jobs data, which put to rest recent sentiments that the Federal Reserve may consider tightening policy in the coming months.

The U.S. Bureau of Labor Statistics reported earlier the economy added 88,000 nonfarm payrolls in March, way below expectations for a gain of 200,000 and below the 268,000 jobs added in February.

The private sector added 95,000 jobs last month, after an increase of 254,000 in February, missing expectations for a 209,000 rise.

The report also showed that the U.S. unemployment rate ticked down to 7.6 per cent in March, from 7.7 per cent the previous month, as more Americans left the labor force.

The news sent the dollar falling and gold rising on expectations for the Federal Reserve to keep monetary stimulus programs in place, including its USD85 billion monthly bond-buying program that weakens the greenback as a side effect.

The June COMEX gold futures had tumbled to 10 month low of $1539.4 earlier this week, however it jumped back to end the fortnight at $1575.9 an ounce.

It rallied to a one-month peak in March on worries about fiscal stability in Europe, as politicians scrambled to clinch a bail-out for Cyprus.

Fear that central banks' money-printing to buy assets will stoke inflation has been a key driver in boosting gold, which rallied to an 11-month high in October after the Fed announced its third round of aggressive economic stimulus.

The international gold prices are down nearly $80 from its last year's level as the US dollar has appreciated.

The June COMEX gold futures are trading at $ 1575.9 an ounce as on 5th April 2013 whereas last year the metal has been trading near $1650 an ounce levels.

The US dollar has gained nearly 2 per cent in April 2013 compared to the same period last year.

However the MCX gold futures are trading higher than it was during the same period last year.

The MCX June gold futures finished at Rs 29710 per 10 grams on 5th April 2013 whereas during the same period last year gold prices were hovering around Rs 27500-28000 levels.

One reason for this difference is depreciation in the Indian currency. The Rupee is down nearly 9 per cent at 54.88 per US dollar as compared to 50.5 in March 2012.

The Rupee is expected to depreciate further in the new fiscal year because a weak currency is desirable to fix India's current account.

The shortfall in India's current account, the broadest measure of trade, widened to $32.6 billion in the quarter ended 31 December, or 6.7 per cent of gross domestic product, as imports of oil and gold surged

Silver Updates

Gold futures climbed back in Asia electronic trades today on value buying following a fall of nearly $40 yesterday touching a low of $1705.50 an ounce ignoring the optimism over the U.S. fiscal-cliff talks that boosted other risk assets.
December gold futures rose $3.6, to $1,720.1 an ounce in electronic trading on the Comex division of the New York Mercantile Exchange. Yesterday, it dropped $25.80, or 1.5%, to settle at $1,716.50 an ounce. It fell by as much as $36.80 to touch a low of $1,705.50 during the session.
Today, the advance came as the ICE dollar index, a gauge of the greenback’s moves against a basket of six other major currencies, was little changed at 80.268, compared with 80.262 in North American trade late Wednesday.
Gold investors shrugged off U.S. President Barack Obama and House Speaker John Boehner’s optimism that lawmakers would reach an agreement to avert the fiscal cliff. Uncertainty related to the cliff — a reference to the possibility that $600 billion worth of tax increases and spending cuts will kick in from January unless politicians reach an agreement.
MCX December gold futures may open today’s session near Rs 32300 levels with resistance near Rs 32350 levels.

MCX Gold & Silver Updates

Gold Holdings at all-time high:

The positive U.S. GDP report announced last week has meant improved risk sentiment & the recent pullback in Gold Prices has attracted physical demand and investor buying. With this GDP report, it’s been 13 months that the economy has actually expanded. Gold market traders are again getting to be the most bullish in three weeks as investors’ bullion holdings rose to a record on Friday 26 – 2012. Investors boosted holdings in exchange-traded products to an all-time high of 2,585.1 metric tons, valued at $142.4 billion, data compiled by Bloomberg show. Hedge funds’ bets on a rally are near the biggest in more than a year, according to U.S. CFTC – Commodity Futures Trading Commission data. Central banks from Europe to China to the U.S. have pledged to do more to boost economies. The yen reached a four-month low versus the US Dollar this week on speculation the Bank of Japan (8301) will further expand stimulus and the Federal Reserve said it plans to continue buying bonds. A QE4 can be expected from the US Federal Reserve or an expansion to the QE3 when Operation Twist finishes in two months by December end. The BOJ, which holds a policy meeting Oct. 30, will consider raising its asset-purchase program by 10 trillion yen ($125 billion) to 90 trillion yen, the Nikkei newspaper reported. Inflation expectations measured by the break-even rate for five-year Treasury Inflation Protected Securities jumped 33% this year and reached a 16-month high in September. Gold ETP holdings gained 7.9% since the end of July and now account for almost a year of mine production.

Gold Silver Tips

Much of the current weakness in Gold Futures appears to be only technical in nature. Some traders are exiting positions on disappointment that gold has not able to break above $1,800, particularly after a chart reversal on Oct. 5 when the monthly U.S. jobs report was released. But for the Long term, nothing has changed drastically, except maybe a lack of conviction on failing to cross the $1800 level. Technically speaking, Gold and Silver are both near their short term bottom & could take an upswing. Gold has a reasonable support near the minor congestion area of $1720 – $1726.3 range whereas Silver has support in the $32.05 to 32.41 ranges. This range can provide near-term buying interest. On a remote possibility of longs liquidation occurring on the current Gold Prices softening, if Gold slips below $1720, then Gold Prices may lose the upside advantage & could be seen hurtling towards $1666. Silver, though seems more sustainable on the upside levels, could lose steam if closes below $32 & then could slump to $30.25 also. There is the minor risk of more weakness if support levels in Gold & Silver do not hold. Gold Holdings by exchange-traded products are higher so far in October. Gold ETP holdings continue to flourish with inflows of 10.1 (metric) tons over the past week, taking flows for the month to date to over 30 tons. Inflows for the year to date have now reached 224 tons, surpassing the full year last year (175 tons) but still below y/y flows for 2010 (361 tons). Gold buying of 1.33 million ounces so far in October by Gold ETFs is about 52% of the September inflows. A potential upside catalyst occurs later this week when leaders gather for a European Union summit.