Akshaya Tritiya Special Report on Gold

Tuesday | April 24, 2012

Content
Akshaya Tritiya Special Report on Gold Strategy/Recommendations

Prepared by Research Team

Technical Team Anuj Gupta Sr. Technical Analyst Anuj.Gupta@angelbroking.com (022) 2921 2000 Extn. 6137 Fundamental Team Reena Walia Nair - Sr. Research Analyst reena.walia@angelbroking.com (022) 2921 2000 Extn. 6134

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Akshaya Tritiya Special Report on Gold

Tuesday | April 24, 2012

Akshaya Tritiya Special Report on Gold

Moving in tandem with the risk sentiments in global equities, Gold has largely lost its essence as the safe-haven demand driver. Its inherent fundamental values are witnessing a sea change, as equities outperform gold this year, despite a mixed macroeconomic scenario. First-quarter 2012 performance has been appalling in case of the yellow metal which has risen by more than 6 percent as against an average gain of more than 11 percent in case of global equities. The figures are surprising given the ongoing European economic woes along with heightened uncertainty over quantitative easing in the US economy. Gains in equities largely indicate that investors feel more settled, regardless of economic hurdles. This may be due to the prolonged presence of a gloomy global economy, and the extensive support to global majors in the form of quantitative easing. Since investors look forward to further support from global policymakers, the need to flock to gold as a safe-haven investment has deteriorated. Also, the prices have increased considerably in the past ten years. It is difficult to associate gold in the form of jewellery now, as the average monthly price of gold in India stands around Rs28,000/10 gm, while only a few years ago one would have shelled out less than Rs10,000/10 gm. Due to this, investors are now looking with an open mind at a variety of investment options. While gold in the jewellery form is losing its stake as the largest demand driver, investors who truly believe in the long-term gold story are moving towards ETF investments, or prefer other precious metals like silver, platinum and so on. Jumping into the gold investment boat ride when the tide is lower is not considered the best option. Within the gold investment category itself, one can choose from buying physical gold coins and bars to ETFs, gold futures, spot gold on the exchange platform etc. Slowly and steadily, the movement in gold is again becoming distinctive, but with a new tone. The factors driving the trend have changed and whether crude oil prices remain around $100/bbl and raise inflation fears, gold will take cues more from risk sentiments and move in tandem with trend in equities or other higher-yielding and riskier investment assets. This is unlike the opposite trend seen in the past, where the performance of gold would not be same as the riskier assets. A large portion of this change can be attributed to the underlying economic problems, which have not dissolved since it began in late 2007. One after the other, issues is seen either in the developed economies or in the emerging and developing economies. While concerns may be different in both of these, the cumulative effect of investor sentiment has led to a shift in investor perceptions. Investors will keep an eye on a US Federal Reserve policy meeting later in this week. The Federal Reserves approach towards monetary policy has been a crucial factor behind the fluctuation of gold prices in recent months. If the Fed drops any clue on monetary easing at the meeting then this may lead to upside in gold prices. Traders of gold in India which is the world's largest consumer of gold, kept themselves away from gold buying despite the upcoming Akshaya Tritiya festival which is traditionally known as a main gold purchasing day in India mainly due to a weaker Rupee which made imported bullion more expensive. Outlook While the long-term bullish trend in gold is expected to remain upbeat, it unarguably is an important asset class. But from here on, sharp upside in the yellow metal is expected to be restrained in the medium-term due to the mixed macroeconomic views and sentiments.

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Akshaya Tritiya Special Report on Gold

Tuesday | April 24, 2012

On the above quarterly gold price chart, we have seen that from the year 2005 to till date gold prices are trading in the bullish trend. It is noticing that from the year 2005 prices are trading in a parallel line manner i.e. between Line A, Line B and Line C respectively. Here, Line B is a middle line of Line A and Line C. We have seen that from March, 2007 to September, 2011 prices are also trading between another channel i.e. between Line B and Line C which indicates further upside. After a long trading session between the Channel of Line B & Line C, prices breached the Resistance Line B on September 2011 and touched the main Resistance Channel of Line A. Now we are seeing that from last 3 quarters prices are consistently trading between channel of Line A and Line B. Now prices are taking support on Line B. Technical Speaking prices are continuously trading above 5 quarter EMA (Exponential Moving Average) from year 2005 to till date. Prices are having good support at 27000 levels and strong resistance at 31500 levels. We are recommending to Buy Gold on in any form it can be in Futures (In MCX) or Gold ETF (In NSE) for the target of 31000 / 31500.

Strategy :- ( From Akshaya Tritiya 2012 to Akshaya Tritiya 2013)

Buy Gold between 28600 - 28700, SL - 27000, Target - 31,000 / 31,500 (CMP:28700) Buy GOLDBEES between2740 2750, SL 2590, Target - 2975 / 3030 (CMP: 2755) Buy GOLD RELGOLD between 2680 2690, SL 2530, Target 2910 / 2960 (CMP: 2694)

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