U.S. and global equities sold off Monday, taking their cue from a sharp drop in Chinese equities following a rise in Chinese money-market rates. The sell off continued in the Asia today on concerns about a Chinese liquidity squeeze which had sparked a global selloff the previous day. Shanghai shares extended losses on worries about the impact from high money-market rates.
The Shanghai Composite Index fell 0.8%, recovering a little after falling more than 1% in the opening minutes. The Shanghai benchmark plunged 5.3% on Monday for its worst finish in nearly four years.
Adding more pressure on gold prices, analysts at Goldman Sachs cut their outlook on the metal for 2013 and 2014, citing growing price risks from a brightening U.S. economic picture. The bank now expects gold to end this year at $1,300 a troy ounce, down 9.4% on its previous forecast. It sees gold ending 2014 at $1,050 an ounce, down 17.3% on its earlier outlook.
"Medium term, we expect that gold prices will decline further given our U.S. economists' forecast for improving economic activity and a less accommodative monetary policy stance," the bank said. "Further, with quantitative easing tapering likely to start soon, perhaps even a bit sooner than previously anticipated, we are fast forwarding on our real rate path."
The price of gold plunged 6.3% in a single session last week after U.S. Federal Reserve Chairman Ben Bernanke said the U.S. central bank could start winding down its $85-billion-a-month bond-buying program later this year.
Gold for August delivery is trading up $1 at $ 1278.1 an ounce in the electronic trades today. Yesterday, fell $14.90, or 1.2%, to close at $1,277.10 an ounce, after having surrendered almost $100 over the course of last week’s trading.
MCX August bullion may open today’s session near Rs 26850 levels with resistance near Rs 26930 levels and support near Rs 26740 levels.
Source by Commodity Insights
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