Uncertainty following the ongoing political turmoil in the MENA (Middle East North Africa) region has resulted in volatile and choppy conditions across global commodity markets in recent days. Developments in Libya are being closely monitored. To be sure, oil prices have moved up sharply over the week. Similarly, gold and silver have extended their gains because of their safe haven status. However, base metals and agricultural markets have come under pressure from the prevailing environment of risk aversion.
Right now, there is flight to safety. Geopolitical tensions, rapidly rising crude, concerns over slowdown in demand, weaker dollar and weaker equity market have combined to propel gold and silver trading. Prices extended their gains over the week with gold racing towards all-time high and silver to 30-year highs. On Friday, prices eased a little. In London, gold PM Fix was at $1,403 an ounce, down 0.6 per cent from the previous day's $1,412/oz. Silver lost 2.2 per cent with Friday AM Fix at $32.54/oz as compared with the previous day's $33.28/oz.
The charged geopolitical conditions in the MENA region and other circumstances such as easy money policy, low interest rate, inflation expectations and risk aversion among investors are likely to prove positive for gold and silver in the period ahead. There is every likely gold prices would touch new highs this year with long-term investment demand intact and emergence of physical demand upon price dips. Silver is sure to remain volatile because of the large surplus; but would continue to track gold in any case.
According to technical analysts, gold is oscillating around the bull flag trigger in the 1410 area. There is reason to remain bullish. One can expect a clear break over there to confirm gains through the all-time high at 1432 towards the next target of 1460 and then the 1500 area. Silver, on the other hand, is correcting lower off the 34.34 highs. Buying interest may emerge in the 31.26 area.
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