MCX Gold Prices Tumble On Rupee Rise – Zoom To Record On Yen

Sentiment towards Gold Investment remains lukewarm due to recent tepid price action and confusing & mixed economic data. MCX Gold Prices have been tumbling since the past week weighed by a stronger Rupee. The Rupee, which hit the highest level in more than three-and-a-half-months, plays an important role in determining the landed cost of the US Dollar-quoted Gold Bullion. India raised $585 million on Friday through a share sale in Oil India, with 40-50% of bids being accounted for by FIIs. The INR- Indian Rupee has been on an upswing ever since positive steps have been undertaken by the Govt. of India in regards to keeping the Current Account Deficit (CAD) in check via hiking the Gold import duty & thereby reducing Gold Demand & also through hiking the diesel prices which has been a huge burden on the Government coffers. A weaker US Dollar on Friday helped foster demand for gold although the ICE dollar index which measures the greenback against a basket of six currencies, rose to 79.269 Monday from 79.097 Friday. MCX Gold Futures for April delivery on the Multi Commodity Exchange hit its lowest in five months to Rs. 30,487 per 10 grams today afternoon, a level last seen on 20th August 2012. MCX Silver contract for March delivery was 0.60% lower at Rs. 58,031 per kg. Silver Prices have seen a volatile & a bidirectional movement filled last week. Gold Market traders had accumulated Gold stocks, when the finance minister hinted of a duty hike on January 2, and later actually raised the duty on January 21. The weddings and festivals season has started in India which generally is the start to the Gold Jewelry buying spree for the year. Comex Gold too failed to climb above a recent narrow trading range as mostly upbeat U.S. data took away the safe haven appeal of Gold Investing. Gold Demand for investment purpose withers when economic recovery gains traction, but resumes momentum when this so-called economic recovery leads to higher inflation. Platinum rose to a 4 month high ($1,705.25) and Palladium soared to its highest since September 2011 ($759.75) primarily due to concerns about supply especially from South Africa.

Gold Prices technically speaking:
Gold advanced 0.54% for the week, while Silver was up 1.99%. The most-active April Comex Gold Futures contract on the Comex division of the New York Mercantile Exchange settled at $1,670.60, Friday last week. Comex Gold Futures have a support around $1649, which can play the role of a bouncing board again. But if this support level is broken, the slump may be lead to $1637 & only then sharply towards $1621. In the week ahead, Gold Market traders will be anticipating the outcome of upcoming policy meeting by the European Central Bank and the Bank of England on Thursday. This week’s U.S. economic highlights include Factory Orders at 1500 GMT today, ISM Services on Tuesday, Initial Jobless Claims, Productivity, Unit Labor Costs, and Consumer Credit on Thursday, and the Trade Balance and Wholesale Inventories on Friday. The Eurozone Sentiment and PPI are also released today and currency and Gold Traders will be paying close attention to the ECB’s monthly policy statement on Thursday for any attempt by the ECB to weaken the euro as currency wars heat up. The Chinese week long holiday for the Lunar New Year starts on Saturday and therefore physical buying will continue this week and lend support prior to becoming quiet next week. Gold Holdings of SPDR Gold Trust, remained unchanged for its 4th session at 1,328.092 tons.

Gold Prices Hit New Record at 155,180/oz in Japanese Yen:
The benchmark Gold on Tokyo Commodity Exchange (TOCOM) hit a record high of 5,000 Yen a gram, driven by a weak yen and the continuation of the Bank of Japan’s loose monetary policy. Gold Bullion for delivery in December climbed as high as 1.2% to 5,000 Yen per gram on the TOCOM. In ounce terms, the yen fell to 155,180/oz against gold, its lowest level since 1980. According to the data on Bloomberg, the all-time record high for gold priced in yen was 204,850 yen on January 21, 1980. Thus, Yen Gold remains 33% below the record Intraday nominal high from 1980. Given the Japanese determination to devalue the yen to escape deflation, the record nominal high will almost certainly be reached in the coming months. The yen was 92.97 per dollar on Feb. 1st its, the lowest ratio since May 2010. The Japanese Yen dropped 2.1% last week its 12th week of losses in a row. Despite Japanese Finance Minister Taro Aso claiming that “the objectives from the current government are not intended to weaken the yen” – that is exactly what is happening. A cheaper Yen boosts Japanese exporters, reported Goldcore. It helps increase the earnings abroad when they are funneled back into yen, plus it lowers the price abroad of goods that are made in Japan and exported. The country’s strong auto and electronics sector benefiting from the cheap yen are outperforming the benchmark index. The yen fell by more than 20% against gold in 2012 and analysts are concerned that Prime Minister Abe and his new government’s determination to stoke inflation, devalue the currency and promote growth could lead to further falls in 2013. Competitive currency devaluations are set to continue and currency wars deepen and such beggar thy neighbor monetary policies will lead to debased currencies, inflation and the real risk of an international monetary crisis.