Gold prices traded range bound in the last week. After witnessing rise in past few weeks prices failed to move higher on account of profit booking. But due to high investment demand and weakness in dollar prices had limited downside. Silver prices have witnessed relatively larger gains in recent times. Strong investment by ETFs is the prominent reason for this rise. It is expected that investment demand for silver in 2009 could comprise 20%- 25% of total demand in 2009, as compared to 7% in 2008. The holdings of the iShares Silver Trust ETF reached to 8,605.43 tonnes on June 3. Rise in oil prices have also played key role in supporting gold. Meanwhile dollar lost ground after ECB kept interest rates unchanged and ECB President said that Eurozone economy is expected to recover in the second half of this year.
The outlook for gold looks largely dependent on the path of the dollar over the coming months as a trillion-dollar-plus U.S. deficit and the impact of unorthodox monetary policy to boost lending, could stoke inflation greatly. Further, investors are worried about the imminent collapse of the dollar which would have severe ramifications across the board. Bullion’s link to the dollar is a well-established one, with the metal traditionally used as a hedge against weakness in the U.S. currency. A softer dollar also makes dollar-priced gold cheaper for holders of other currencies. Longer-term inflation worries will continue to shape demand for gold.
The overall health of the global economy will stay in focus. Spot Gold can find crucial support in the zone of $960-948 levels, whereas major resistance zone is seen between $985 and $1000 MCX August Gold can face support around Rs.14730/14600 levels, whereas resistance is seen at Rs. 14975/15110 per 10 gram.