Prices also retraced by around 50% during the month after it rallied from a low of Rs26313 per 10gms in September to a high of Rs27640 per 10gms in October.
Gold prices traded sideways last month amid a blend of fundamentals that kept bullish and bearish forces active for the en-tire month. The most prominent factor last month was the festival season in India, world’s second largest consumer of gold. Diwali and Dhanteras underpinned de-mand of yellow metal last month. Gold sales in India during the festivals of Diwali and Dhanteras rose by about a fifth compared to last year, a senior official at the country's biggest gold trade group said. Premiums in India, the second biggest buyer of bullion, jumped to $17-$18 an ounce this week, compared with $12 last week, on surging demand. The dollar traded volatile last month to end almost flat against a basket of currencies.
The U.S. dollar was boosted earlier during the month amid mounting expectations the Fed will remove accommodation policy sooner than previously thought. The U.S. Non farm pay-rolls data for September under-lined optimism over the strength of the economy. The Department of Labor said that the U.S. economy added 248,000 jobs in September, well ahead of forecast for jobs growth of 215,000. The unemployment rate ticked down from 6.0% to 5.9%, the lowest level since July 2008.
The ECB stress test gave most of its 130 banks a clean bill of health dampened safe-haven demand in gold. U.S. home sales rose to a six-year high and Britain's economy expanded 0.7 percent in the third quarter, easing fears over a global slowdown. This kept gold prices capped during the month. The dollar surged to a four-year high against a basket of currencies and a two-year high against the euro after euro zone inflation fell in September. The recent strength in the labor market in the U.S. and the outflow of gold-backed ETPs provide a negative backdrop for gold prices.
Gold prices ended slightly lower last month amid ongoing tussle between bulls and bears. Prices witnessed corrective moves during the month and witnessed fresh shorting on the rallies to end the month in red. Prices also retraced by around 50% during the month after it rallied from a low of Rs26313 per 10gms in September to a high of Rs27640 per 10gms in October.
The weekly RSI is trading slightly below 50 , an indication of weakness in prices for the next month. Weekly charts are showing traction in bearish trend but gold bugs are likely to offer support at lower levels. Having said, this correction is likely to witness strong demand which is waiting on the sidelines where Rs26000-25800/10gms levels look to form the short term bottom, while Rs 27700 per 10gms looks to be the immediate resistance breach of which can even push prices towards Rs 28500 per 10gms. At COMEX as long as the prices do not close below $1180/ounce mark ,which has been acting as a strong support for the prices ,a re-bound might be witnessed in markets. Having said, any decisive close below this level will trigger panic selling in the markets.