GOLD @ $ 1223.50 =
While India look poised to overtake China as World's largest consumer of gold due better economic condition, but Indian growth needs to climb 7 pct and beyond to remain on top. This drop could be due to economic slow down in China, but one cannot ignore the fact that Chinese Central Bank is making every effort to push up its economy.
Last week Peoples Bank of China (PBOC) announced slashing of its benchmark deposit and loan interest rate by 25 basis point. It was China's 3rd rate cut in 6-month pushing one-year deposit rate @ 2.25 pct and lending rate for same period @ 5.1 pct.
Some of the factors that weighed on gold was the weakness of US Dollar, as major currencies made sharp gains. Geo-political Middle Eastern factor was another cause that helped gold to recover.
Despite numerous unfavorable factors, US economic condition should provide bigger picture for gold trend in coming weeks and months. Market witnessed firm support around $ 1170 and current surge in gold that we are witnessing is purely due to sluggish growth in USA in first quarter caused by poor weather conditions.
Though ongoing US economic slowdown could be temporary. Nevertheless, market will be keenly watching overall second quarter economic performance, which needs healing because first quarter GDP was constantly revised downward.
Further, FED in its last FOMC release saw shift in its stance that was enough to put the dent on gold bears, which is why market witnessed 10-year US bond rising beyond 2 pct, currently at 2.15 pct.
Events in next couple of months could be key to gold's next move that will largely depend on US economic recovery. After the release of of FOMC minutes due on May 20, market will try to determine the direction by reading FED language.
More importantly, Greece is still unfinished Euro-zone agenda and is brittle to any unrest. ECB and IMF are the two influencing force behind the scene and they may play important roll to cool down any uneasiness, as both the institutions can ease the situation by either agreeing to delay payment or even write-off Greece borrowings.
And lastly Iran's discussion on nuclear deal, which is suppose to reach an agreement by the end of June needs to be watched carefully, as sanction relief is linked with verification and monitoring.Therefore, there is risk that popping up of any uneasy condition until end of second quarter could see demand for gold.
Technically, initially gold could still make some more up-moves and break of $ 1245-50 is required for test a of $ 1280-90 zones, which looks unlikely to happen, as sellers may emerge on rise. On the downside, gold needs to penetrate below $ 1175-80 levels for $ 1120-40 zones.
However, any deteriorating condition in Greece or Iran disagreement could see a sharp surge towards $ 1330-50 zones.