Gold to move within wide range, track dollar & oil

MUMBAI: Gold prices, which rallied sharply after US Fed Reserve chairman Ben Bernanke’s neutral statement on tightening of interest rates, are likely to be range bound in the coming week.

The roll-over of the gold contracts from August to December on July 26, and a host of expected data on the performance US economy next week are likely to keep gold within range, albeit a wide one, said Krishna Nathani, head, research, Indiabullion.com.

“Gold will trade within a wide range, and could see many highs and lows during the week because of that,” he said, adding “The first resistance level will be seen at $644 an ounce, and the support levels will be seen at $613.” Silver will see resistance at $11.30/35 an ounce and support at $10.40, and is largely expected to track gold.

Last week, after consolidating gains following Mr Bernanke’s statements, gold for August delivery on the New York Mercantile Exchange ended the week lower by 7.2% or $12.3 at $620.20 an ounce. Silver dropped 22 cents to $10.84 an ounce. In Mumbai, spot gold (99.5) ended the week Rs 500 lower at Rs 9,940 per 10 gm on Saturday, and silver closed at Rs 17,495 per kg.

“Gold will get track the dollar and oil prices, which will depend on the Middle East crisis that has so far not taken a turn for the worse,” a Mumbai-based analyst said. A weaker dollar supports gold as it increases its appeal as a safe haven asset or hedge against inflation. Geopolitical tensions also increase gold’s safe haven appeal.

Reports suggesting Israel may invade Lebanon pushed crude oil for September delivery above $75 a barrel on Friday, while the dollar dropped to one-week lows against the euro and the yen.

“In the local derivatives market, gold dropped to Rs 9,459 per 10 gm from Rs 10,056 in the August delivery contract on the Multi Commodity Exchange. Silver too closed lower at Rs 17,117 per kg from Rs 18,480 in the past week.