Unless a resolution over the Greece bailout is reached, we could see gold and silver trading within a range with a slightly positive bias. A breakthrough in Greek negotiations may however lead to a selloff in gold.
Precious metals had a mixed week as gold ended the week almost flat on lack of clarity over the Greek agreement with its creditors while silver ended positive in line with a pullback in industrial metals. The drama over Greece continues into this week with negotiations expected to continue on Monday and lack of any agreement could help gold prices stay supported. U.S. data was mostly positive last week which capped precious metals and the general strength in the dollar is eroding appeal of precious metals. Adding to that the ceasefire announcement between Russia and Ukraine cut some of the risk premium in gold prices and lifted general market sentiment. Demand wise, World Gold Council figures showed that gold demand in 2014 fell to a five year low even though it expects Indian and Chinese demand to pick up in 2015. Overall, unless a resolution over the Greece bailout is reached, we could see gold and silver trading within a range with a slightly positive bias. A breakthrough in Greek negotiations may however lead to a selloff in gold. The energy complex gained last week with Crude oil prices surging for a third straight week as the decline in U.S. rig count for a 10th straight week is signaling that U.S. oil production may slow. Also, spending cutbacks by major oil firms is providing a much needed respite to an oversupplied market by raising hopes of a slowdown in supply. Data from Baker Hughes showed that the number of oil rigs in use in the US fell for the 10th straight week to since August 2011 and are down 34% from a peak of 1,609 seen in October 2014. Adding to that, U.S. data has been robust which is raising hopes of higher consumption in the U.S. even as the global economy is showing now real signs of growth. Renewed violence in Libya further induced short covering in oil which registered the biggest two-week gain since March 1998. However, physical markets at the moment seem to be amply supplied with U.S. inventories at a record high. Natural gas meanwhile inched higher on supportive weather and on expectations of another cold blast in the coming week. Going ahead, we expect crude to have a positive bias in the near term even as the medium term bearish outlook remains intact
News Source : Moneycontrol.com
January 11, 2016