BULLION REPORT

Global financial market and global economy has created hype in investors mind; which has resulted in safe haven buying in bullions. We have seen very strong rally in bullions in recent weeks and it seems that it will continue further for some time. Bullions have performed quite well in recent times and we hope it will perform further but real question is that where it will stop? To understand that we need to understand basics of financial markets as well as bullions.

Kundan Narkhede. Research Analyst, Commodities Dept.

[August 15, 2011]

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[15th August 2011]

MCX GOLD
Gold has been performing quite well as it has rallied from `17,000 to `24,000. Gold has been climbing since last September 2010 along with some correction from time to time. This upward trend is supposed to be very strong as it has given correction and has rallied after that. The black lines drawn are Fibonacci retracement levels and it suggest that after gold made high of `22856, it gave fair bit of correction and tried to break that level again. As it tried twice or thrice but after few unsuccessful attempts it climbed that level and had made new high of `24435 which is lifetime high. When we look at volume indicator it suggests that volumes have been pretty ordinary and even while climbing volumes have not been high.

Ichimoku indicator clearly suggests further upward movement in next few months and support comes around `22900 to `23100. At the same time RSI and Stochastic shows that gold has been in OVERBUYING zone; on the basis of which we can see some correction in gold before it climbs to new levels. Correction is expected also on the basis of TRIX and MACD indicators as they have also been screaming of overbuying.

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When we talk of fundamentals of global markets there have been huge problems to be taken care of. Some European countries have been under lot of stress due to credit default swap probability. At the same time U. S. economy has been stalled means it has not been performing well, which has made market more vulnerable. All these scenarios ignite buying in gold as safe haven buying and investors have been continuously hedging their portfolios.
Monthly support and resistance:

Support 1: Support 2: Support 3: Support 4:

`22066 `20966 `19220 `17474

Resistance 1: Resistance 2: Resistance 3: Resistance 4: Pivot Point: `22712

`23812 `24485 `26204 `27950

While we are talking of long term movement in gold, we have seen continuous uptrend in gold since 2005 and this uptrend has been quite good because of its continuous uptrend with certain amount of correction.

Below given chart is for international gold which shows proper uptrend as MCX chart. We can see blue lines which are Fibonacci levels and gold has climbed each level from time to time as per fundamental signals. MACD, RSI and Stochastic have been in overbuying zone since few days and we might see some correction from here
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before it climbs. Black lines drawn are Elliot waves and A1 is first climb then A2 is correction for first climb after which there is A3 which is again uptrend. After A3 we expect formation of A4 which would be short term correction phase for gold.

Conclusion: We conclude from all these facts that in short term gold might show some correction and fresh buying should start after that correction. This conclusion is based on technical view and if we consider fundamental view then we might see some further uptrend after which there will be correction. But this uptrend will not last long as it need fair bit of correction for formation of strong uptrend.

[15th August 2011]

MCX Silver
Silver has been performing exceptionally well as it has rallied from `30,000 to `73,600. Silver has been climbing since last October 2010 and we have not seen correction from time to time as we have seen in gold because of which there had been huge selling after it touched `73,000 mark. This uptrend had few fundamental reasons like China being major electronics products producer (silver being used in electronics products) and use of silver in various industries; which gave white metal huge demand. The lines drawn are Fibonacci retracement levels and from level of `42700 it has climbed continuously till `73600, which was its life time high and gave fair bit of correction from highest level to almost till `50,000. When we take a look at volumes, we can see that volumes have not been very ordinary as from time to time we have seen huge volumes buying as well as sell off. Variation in volumes suggests that investors are ready to buy and sell white metal at certain levels. Referring to chart we can see Fibonacci levels which are drawn are working properly and silver has not been able to go across `61,000 mark which is psychological resistance. Down side support is at `54000 and silver has traded on this level for quite some time. We are expecting silver to break resistance which is at `61000 also psychological mark and expect it to move along with gold.

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Talking of indicators like MACD, TRIX, RSI and Stochastic; they have started to show downtrend and could bring some sell off in white metal. Speaking of fundamentals, U.S. debt problem along with debt default problems in European countries could create problem in global financial market and could bring some safe haven buying in white metal. Fundamental scenario has not been encouraging because ECB (European Central Bank) has not been able to convey any solution for Greek sovereign debt problem. Whereas U.S. had been in trouble about its debt ceiling which created hype in global financial market and some comments were made on downgrading of U.S. bonds. But this problem was solved by increasing debt ceiling; at the same time U.S. economy has been stalled and again investors all over the world were in panic and started to sell off commodities along with white metal. Ichimoku indicator suggests some sell off in silver and support could come around 57500 and if that level is crossed then we might see further sell off. This conclusion in only based on technical view, because fundamental news could change whole scene completely because of safe haven buying.
Monthly support and resistance:

Support 1: Support 2: Support 3: Support 4:

` 52017 ` 45137 ` 33856 ` 22575

Pivot Point:

Resistance 1: Resistance 2: Resistance 3: Resistance 4:

` 56418

` 63298 ` 67699 ` 78980 ` 90261

At the same time silver in international market touched new life time high after almost 30 years. Fundamentals news has been affecting on silver a lot and we have seen huge sell off as well as buying but at the same time we have seen range bound movement.

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Conclusion: We conclude from all these facts that in short term silver might show some correction and fresh buying should start after that correction. This conclusion is based on technical view and if we consider fundamental view then we might see some further uptrend after which there will be correction. But this uptrend will not last long as it need fair bit of correction for formation of strong uptrend.

[15th August 2011]

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