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Tuesday, March 24, 2009

Gold drops more than 20 dollars

Profit booking extends in yellow metal after sharp rise last week

Gold continued to drift lower today, continuing to back peddle on improving risk appetite in the global equities and ideas that the recent gains were overdone for the commodity. Traders questioned the sharp vertical upmove in the middle of the last week. The commodity drove sharply up as dollar fell apart across the board after the US FED monetary policy statement. The US dollar also appreciated ahead of the US consumer confidence data and Housing Price Index and in turn pressurized the yellow metal.

The Federal Reserve said last week it will buy up to $300 billion in longer-term Treasuries and raise the size of lending programs already aimed at reducing mortgage rates by another $750 billion, a forceful reminder that officials still have powerful tools to combat the recession.

However, the prices slid lower thereafter as global equities rallied and the safe haven status seemingly got faded for the yellow metal. News that India- the largest importer of the commodity did not import any of the yellow metal in February also provided some backlash.

Add to it the expiry of the April COMEX futures and it was quite clear that the immediate price action would be negative for Gold. This is precisely what has been witnessed in the current week. The COMEX April Gold futures slipped to a low of $ 927.40 per ounce and currently trades at $929.40, down $23.10 an ounce from the previous close.

MCX Gold futures for April continued to retreat as traders cut their longs ahead of the expiry next week. After dropping 1% yesterday, the counter lost heavily today, slumping to the watershed Rs 15k levels in the evening trades before managing a moderate upturn. The contract is currently trading at Rs 15045, down Rs 380 or 2.46% from the previous close with 0.69% drop in the open interest.

source: Capital Market
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