Precious Metals Preview: Equities And INR To Set Tone For Gold

COMEX Gold futures slipped to a five week low on strength in US stocks and sound economic data. DOW jumped above 24000 mark on strong quarterly results from some of the biggest US companies and Gold stayed slippery, falling under $ 1320 levels. MCX Gold futures extended losses too and closed just above at Rs 31200 per 10 grams mark. The Indian Rupee edged up a bit back after testing its 14 month low last week and a further rally in the INR could cap local Gold in coming days.

Mining giant Barrick Gold Corp reported that first-quarter adjusted earnings rose from a year ago despite lower production, following higher gold prices. Adjusted net earnings jumped 5% to $ 170 million, or 15 cents per share, from $ 162 million, or 14 cents, in the first quarter of 2017. The company reported net earnings of $ 158 million, or 14 cents per share, for the January-March period, down from $ 679 million, or 58 cents, a year ago. Barrick produced 1.05 million ounces of gold in the first quarter at all-in sustaining costs of $ 804 per ounce. In the year-ago quarter, output was 1.31 million ounces at AISC of $ 772 per ounce. Barrick expects gold production in the second quarter to be roughly in line with the first quarter at around 1 million ounces, mainly due to the impact of a scheduled maintenance shutdown at the Barrick Nevada roaster.

The World Gold Council (WGC) noted in a latest update that investors often use the direction of the US dollar as a bellwether for golds performance. However, over recent years, short-term movements in gold have been more heavily influenced by US interest rates and expectations of policy normalisation. WGC noted that analysis shows that the correlation between gold and US rates is waning and that the US dollar is again a stronger indicator of the direction of price. And, in our view, this will continue over coming months – even while the dollar wont explain golds movements entirely. Furthermore, analysis shows that higher real rates have not always resulted in negative gold returns.