The past couple of months has seen a lot of movement in the Indian

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and international bullion market. December last year ended with silver and gold prices rising marginally, but these gains were promptly swept away by the rebounding dollar that forced gold to below the psychological support level of $1,100 an ounce to close at $1,092.30 in New York. Silver, too, dropped below the crucial $17.00 level to as low as $16.93 before closing at $17.01 an ounce.

The dollar continued its December rally after hitting a 15-month low on November 26. Traders were betting on rising Federal Reserve rates in 2010 and an improving economy. Debt concerns in Greece and Dubai also fuelled the dollar’s momentum. Analysts expected a stronger dollar to further put pressure on precious metal prices in the early part of 2010. They said gold and silver might get some support from bargain-hunting speculators and long-term investors.

On January 21, gold was still looking weak with good support seen at $1,107. On the upside, resistance was seen at $1,123. Silver, in turn, looked a better investment prospect than gold. However, the global financial crisis was holding silver in waiting mode, more so as investors seem more biased toward gold because of its “safe haven” tag. At that time, market analysts said that silver’s long-term future would rest on new industrial applications, which was more likely to happen in a recovering economy than a depressed one. Silver could touch $24 levels in the near future, they predicted. “With developmental work happening in China and India, demand will only increase,” said Nilanjan Dey of Wishlist Capital.

The next day, January 22, the precious metals got the much-needed correction. The market looked positive and a buy position was created in gold and silver. There was a buy recommendation for silver in the range of Rs 27,000/27,100 with a stop loss of Rs 26,800 for the target of Rs 27,375/27,550/27,600.

The next week (beginning January 25) began on a different note. Gold and silver gave up their gains amid fears that the long-term rally of precious metals had ended. Gold fell by 3.61 per cent to $1,089/ounce and silver by 8 per cent to $16.932/ounce. The dollar’s strengthening had been a major reason for the correction. The Greece problem continued to trouble the euro as central bankers stated that situation was extremely delicate. Also, China continued to tighten its monetary policy by announcing curbs on lending by banks. Overall, it was a bad week for precious metals.

“The gold price trend is moving sideways and the break below may see prices testing the Rs 16,200/16,100 levels. Immediate resistance is seen at Rs 16,550/16,830 and Rs 16,950 levels. All technical indicators suggest that prices are in oversold zone and can rise to adjust in the coming sessions. Silver’s price trend shall be mildly bearish at Rs 26,400 and even Rs 26,100. It may close below Rs 26,100, and can drift toward Rs 25,350 levels. Immediate resistance is seen near Rs 2,6900-27,500 and above that prices can rise to Rs 28,300,” Vishal Sharma, manager-commodity of Anand Rathi, had told FC Invest at that point of time.

The movements continued in the precious metals market. At the end of the last week, gold and silver fell on stronger dollar. Analysts such as Sharma felt that ‘sell on rise’ should be an appropriate strategy for investors. Support for gold was seen at Rs 16,389/16,338/16,200, whereas resistance was seen at Rs 16,525, above which the price could test Rs 16,610 and Rs 16,740. The advice was: Sell gold on rise with a stop loss of Rs 16,490 (CMP Rs 16,373). Silver also fell on stronger dollar and traders sold off their position ahead of the federal open market committee meet. A buy position should be created above Rs 26,300 levels only. Support is seen at the Rs 25,700 level, Sharma said.

Stressing on the importance of remaining disciplined, Sharma said, “One should trade with strict stop loss and be brave enough to accept the losses. The market is in corrective mode and all sectors metals, energy and agro, are bearing the brunt. The dollar’s rise against major currencies has been the prime cause of the fall. Traders who want to enter only on the buy side should, therefore, wait for the price to correct,” Sharma added.