Gold Weakens on Stronger Dollar, Base Metals Trade Lower

European markets traded on a negative note today mainly on the back of rising concerns with respect to global economic growth. China has cut its growth target to an eight-year low of 7.5 percent for 2012. The country’s economy grew by 9.2 percent in the last year. This led to rise in risk aversion in the global markets today.

Economic data from the Euro Zone indicated that final services Purchasing Managers' Index (PMI) dropped to 48.8 in February from the previous level of 49.4 in January.

Strength in the US dollar coupled with weak sentiments in the global markets led spot gold prices to trade lower by almost 1 percent till 4.30 pm IST today. The yellow metal touched an intra-day low of $1693/oz and was trading below the level of $1700/oz till 4.30 pm IST. MCX Gold April contract dropped around 0.3 percent today, as sharp decline was cushioned on account of a weaker Rupee.

Taking cues from fall in gold prices along with a stronger dollar, spot silver prices came under pressure to trade lower by almost 2 percent today. Silver being an industrial metal also took cues from downside in base metals pack.

The white metal touched an intra-day low of $33.99/oz and was hovering around $34.09/oz till 4.30 pm IST. MCX Silver May contract declined around 0.6 percent and touched an intra-day low of Rs57,519/kg till 4.30 pm IST today.

The base metals complex traded lower on the LME today on the back of dollar strength coupled with rising concerns over global economic growth which affected demand for industrial metals.

Additionally, rise in risk aversion in the markets also acted as a negative factor for metal prices today.

Nymex crude oil prices declined by 0.8 percent today on the back of expectations that fuel consumption will be less as China lowered its growth for the next year.

Oil prices touched an intraday low of $105.54/bbl and was hovering around $105.82/bbl till 4:30pm IST today. On the MCX, crude oil prices traded on a flat note today, touching an intra-day low of Rs. 5283/bbl and were hovering around Rs5299/bbl till 4:30pm IST.

Outlook

Gold and silver prices are expected to trade with a negative bias today mainly on the back of a stronger dollar. Silver will also take cues from downside in base metals.

We expect base metals to come under pressure today on account of weak sentiments in the markets due to rising concerns over global economic growth coupled with a stronger dollar.

Crude oil prices are expected to trade with a sideways bias today, taking mixed cues dollar strength, rise in risk aversion in the markets and supply concerns from Iran.