1. Is the Gold Bull Run over??????
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After being the poster boy of the so-called “Commodity Super Cycle” for more than a decade, gold prices have
been knocked off their perch. Month of April witnessed prices enter a bear market territory with a 25 percent
fall from its most recent highs around $1800 in early October. This article is aimed at looking at gauges’ that
could be supporting this fall over for the Yellow metal.
Strong showing from the Equity markets in the U.S is causing a shift in Portfolio……
There has been a recent shift in portfolio with investors taking likelihood for stock market as Dow and S&P
500 hit record highs. Since the beginning of the year, S&P 500 index has risen 13 percent while, gold prices
have plummeted 13 percent. There is clear case of divergence between the gold prices and equity market
(Fig.1). The yellow metal prices are failing to gain traction despite news that normally would have supported
prices to scale higher, including persistent easing measures from Central Banks.
Fig.1. Divergence between GOLD and DOW Index since December’12 (Significant Widening)
Is the Gold Bull Run over???????

2. Is the Gold Bull Run over??????
2 | P a g e
Also, investors pulled back $6.77 billion out of the largest gold backed ETF, the SPDR Gold shares, according
to IndexUniverse.
Gradual Economic Recovery in the U.S…….likely to take the sheen of Gold
Recent signs are that, the U.S economy is gaining momentum and is nowhere close to the situation
reminiscent in 2010-11 period, which saw Gold prices surging on growth concerns and inflating debts in the
U.S . The job market in the U.S seems to have put its past behind and is looking up with Jobless claims falling
to lowest in 5-years and companies adding more jobs.
The housing sector in the U.S is emerging as the beacon of economic recuperation after languishing in the
doldrums since the recession in 2009 and adding to the GDP for the first time since that period.
The improving labor market situation in the U.S is assisting consumer confidence to improve and with
spending contributing a significant proportion of the U.S GDP, situation of revival is impending for the U.S
economy and financial markets.
Geopolitical concerns seems fading…….trouble again for Gold
Many Geopolitical concerns that had driven investor appetite for Gold as a safe bet seems to have abated,
given an improving market conditions in Europe and modest progress on the debt problems in the U.S.
The Chinese growth story fading….alarming signs for the yellow metal
Chinese economy seems to be heading for a hard landing in the coming few months given the recent
lackluster growth numbers. Chinese GDP for January – March quarter rose 7.7 percent from a year earlier
weakening from 7.9 percent growth in the fourth quarter. The industrial production increased from a year
earlier, but was well below the forecast of 10 percent. Escalating worries that Chinese consumers with less
cash would buy less gold is further hurting Gold prices.
Declining Gold prices…..Cheer for India
India is the world’s largest gold consumer with imports surging nearly 39 percent during 2006-2011 period.
In the year 2012, India imported 860 tonnes of gold compared to 986 tonnes imported in 2011. India and
China contribute almost 50 percent of the total consumption. High gold imports by the country have widened
the current account deficit to an all-time high. Consequently, with a view to curb imports and rein current
account deficit, Finance Ministry raised the import duty on gold from 4.0 percent to 6.0 percent earlier this
year.
The most imperative impact of the declining gold prices would be on the current account balance. According
to the RBI, Indian gold purchases account for more than two thirds of the deficit. The current account
disparity stood at staggering 6.7 percent of the GDP in October to December period, the largest level recorded
dating back since 1949 with desired deficit considered being 2.5 percent of the GDP. Recent sharp decline in
Gold prices could help reduce the country’s import cost by almost $7 billion by the end of March 2014.

3. Is the Gold Bull Run over??????
3 | P a g e
The Rupee Factor…….
Chart study is indicating Rupee at a crucial juncture with a “triangle formation”, which throngs uncertainty
over the potential move.
Source: Bloomberg, Geojitcomtrade
The above Rupee chart is indicating at an impending major move in the near-term to long-term. The
triangular pattern is always seen with uncertainty given the direction of the breakout. Critical levels for the
domestic currency are seen at Rs54.70 on the upper side and Rs53.60 on the lower level.
Possible Rupee Outcomes:
>>>>>>> Cracks the lower level support of Rs53.60, Indian Rupee could appreciate to levels of Rs49/Rs
45 in the medium to long run. This could have a negative bearing for the Gold prices.
>>>>>>Cracks the upside level resistance of Rs 54.70, Rupee could depreciate to levels of Rs58/Rs 62 in
the medium term. Implications could be of a limited fall in the Gold prices.

4. Is the Gold Bull Run over??????
4 | P a g e
Technical Analysis
Source: Bloomberg, Geojitcomtrade
With Prices failing to close above the crucial falling trend line resistance at $1489 region, we expect Gold
prices to continue the recent sell-off towards $1420/$1380 followed by $1320 levels in the coming days.
To dent this bearish expectation, prices have to make concrete trades and close with stiff volumes above
$1520, which could further ignite next bullish wave rally towards $1580/$1645 regions.
To conclude, Prices are all set to weaken towards the recent low of $1320 in the coming
days.

5. Is the Gold Bull Run over??????
5 | P a g e
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Author: Joyal Thomas