Silver consolidated its gains after May future reached a high of $1060.00 while gold April future continued to trade in $547 - $555 range. There was no major market moving news which resulted in a dull trading session. The US dollar gained against the major currencies while crude oil prices were above $62.00 a barrel.
There are hardly any sellers in silver. Everybody knows that because of the Barclays silver exchange traded fund approval silver will not fall over the coming weeks which contributed to yesterday’s consolidation. Silver will be used just as an investment avenue or a tool of hedging by the industrial users. The current spike in silver will result in industrial users maintaining higher inventories than a month ago. This will in further shortage of physical silver. Silver’s demand is not dependent on performance of global economy. It’s use in pollution reducing equipments, data storage devices will result in unending demand. If I compare the use of silver with gold, gold is used mainly in jewellery or as an hedge against future financial uncertainty. There is mild demand from medicines, garments and other industry which is negligible. The case for silver to rise in the coming weeks and months is much more than gold.
In India a retail investor has got used to gold prices over Rs.7900/- per ten grams. Gold importers are buyers heavily under Rs.7900/- per ten grams and the demand from them is like a free gift being given to them. Retail physical demand from India will shoot up in April after the Indian fiscal year ends this month which coincides with the start of the marriage season.
It’s the best time to use gold and silver options along with buying and selling in future market as we have the Fed meeting next week and in April we have the various first quarter economic numbers as well as corporate results. Gold April futures are expiring next week. These event risks will add greater volatility to the markets and I prefer to use options markets only when there is higher volatility.
Considering the fragile geopolitical situation, gold and silver are expected to trade higher. Sharp pullbacks (if any) should be used as an opportunity to go long.
GOLD
Gold needs to break and close over $558.00 - $563 zone for $575.00 - $580 zone. On the lower side $547.80 is the initial support with $542.80 and $534.00 as the key short term supports.
SILVER
Silver targets $1080 and $1110. However silver needs to hold $1050.00 on closing basis to prevent a fall to $1032.00. The key short term support stand at $1008 and as long as $1008.00 holds on closing basis the downside is limited.A consolidated fall below $1008.00 will result in $994 and $968 respectively.
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