Precious Metals Market Report
Monday 7 August, 2017
Fundamentals and News*
Gold ETFs see Rs 250 cr outflow in Apr-Jul FY18
Gold exchange traded funds (ETFs) continued losing popularity as an investment class with investors pulling out over Rs 250 crore from the instrument in April-July of this fiscal, preferring equities over them.
Trading in gold ETF segment has been tepid during the last four financial years. It has witnessed outflows of Rs 775 crore in 2016-17, Rs 903 crore in 2015-16, Rs 1,475 crore 2014-15 and Rs 2,293 crore in 2013-14.
On the other hand, equity and equity-linked saving scheme (ELSS) saw an infusion of more than Rs 41,000 crore during the first four months (April-July) of the current financial year.
Stock markets have been on an upswing, touching new highs this year.
According to Vidya Bala, head of MF Research at Fundsindia.com, gold is losing steam as an investment asset class due to gradual rate hike in the US and a possible squeezing in Europe by 2018.
“This is because, when debt as an asset delivers higher yields, gold, which has no underlying fundamentals, tends to underperform,” she said.
Gold ETFs are passive investment instruments that are based on price movements and investments in physical gold.
“While demand from India has traditionally buttressed gold prices globally, sound rally in the Indian equity markets has meant that gold as an asset class has not been favoured. The global rate tightening and a strong Indian equity market may mean a sober outlook for gold,” Bala added.
Further, demonetisation and lower gold price from a strengthening rupee has kept its prices low although imports of the metal shot up. Gold imports for half year ending June this year crossed the entire imports of 2016, Bala said.
According to the latest data available with Association of Mutual Funds in India (Amfi), a net sum of Rs 256 crore was pulled out in 14 gold-linked ETFs during April-July period of the ongoing financial year, as compared to Rs 411 crore in the same period last fiscal.
The outflow meant assets under management (AUM) of gold funds plunged to Rs 5,098 crore at July-end from Rs 5,480 crore at the end of March.
(*source Bloomberg)
Data – Forthcoming Release
Technical Outlook and Commentary: Gold
Gold for Spot delivery was closed at $1258.88 an ounce; with loss of $9.72 or -0.77 percent at 1.00 a.m. Dubai time closing, from its previous close of $1268.60
Spot Gold technically seems having resistance levels at 1266.7 and 1270.2 respectively, while the supports are seen at $1255.1 and 1251.5 respectively.
Technical Outlook and Commentary: Silver
Silver for Spot delivery was closed at $16.27 with the loss of $0.38 or -2.34 percent at 1.00 a.m. Dubai time closing, from its previous close of $16.65
The Fibonacci levels on chart are showing resistance at $16.75 and $16.93 while the supports are seen at $16.19 and $ 16.01 respectively.
Resistance and Support Levels
Indications only, open & closing prices are bids; data source: Bloomberg; important disclaimer below; Times as per Dubai
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