Increasing confidence in the US economy and Strong dollar made investors favor the US dollar over the yellow metal during the month of March. There was a further downward pressure on Gold during the first week with lesser demand from both China and India. With India eyeing to reduce its record high CAD, the bullion markets were bullish that Indian market might impose a tax on gold imports. Maintaining its correlation with gold prices, the silver prices also dipped during the first week of March. Both gold and silver remained volatile during the month. Expect the metals to break down further.
The Cyprus news worked in favor of the yellow metal. The fears around economic meltdown in Europe helped gold cap some gains during the third week of March. The news also dragged the Euro down. This development in Euro Zone made the investors favor the safe haven. During the last week, gold was volatile but managed to hold its ground and end up in positive. The positive economic data from US was again playing its role.
Over the past few months, Gold incurred losses mainly because of the sell off pressure. The gold ETF’s have suffered large outflows since the start of year. The outflows peaked during the month of March. The sell-off is mostly due to improved global economic outlook and concerns on the longevity of the Fed’s quantitative easing. Going forward, the sustainability of US equity rallies would define the movement of gold. Many still feel that the equity markets are due for a correction during the month of April. In India, the tax on gold imports was expected to be implemented in the coming month. These two factors can make gold costly compared to global prices.
