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Gold Drowns Beneath $1330

Capital Market/ 09:36 , Mar 24, 2014

Gold futures slipped below $1330 an ounce in the Asia electronic session today with the U.S. Federal Reserve move to hike interest rates as early as 2015 still lingering on the investor minds.

Also the Federal Reserve's decision to taper its monthly bond-buying program by $10 billion for the third consecutive meeting also robbed off gold's shine. The central bank said that it would reduce its monthly stimulus program by an additional $10 billion to a total of $55 billion a month, in a widely anticipated decision.

The comments from Janet Yellen prompted investors to bring forward expectations for a rate hike to as soon as March of next year. The Fed also updated its forward guidance, discarding the 6.5% unemployment threshold for considering when to increase borrowing costs and said it will look at a wide range of information.

Gold futures for April delivery are trading down $8.4 at $ 1327.6 an ounce on the Comex division of the New York Mercantile Exchange. It ended the week with a loss of 3.11%, or $43.00, the worst since November.

Data from the Commodities Futures Trading Commission released Friday showed that hedge funds and money managers increased their bullish bets in gold futures in the week ending March 18.

Net longs totaled 138,429 contracts, up 11.1% from net longs of 123,007 in the preceding week.

Meanwhile, a preliminary gauge of China's factory activity fell to an eight-month low. The flash edition of HSBC's China manufacturing Purchasing Managers' Index (PMI) dropped to 48.1 from February's 48.5, remaining below the 50 level separating expansion from contraction.

Investors will continue to monitor events in Ukraine, on tension over moves by neighboring Russia in the Crimean region. The political standoff between the West and Russia following the annexation of Crimea escalated after the U.S. imposed harsher sanctions on Moscow. The European Union also agreed to wider sanctions against Russia.

MCX April bullion futures may open today's session under Rs 29700 levels with support around Rs 29600-550 levels. Last week, it tumbled below Rs 30000 per 10 grams as the traders rushed towards local equities as BSE hit fresh all time highs above 22000 on Monday 17th March.

In the coming week, investors will be looking ahead to U.S. data from the housing sector, as well as reports on consumer confidence and durable goods to further gauge the strength of the economy and the need for stimulus.

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