MARKET OUTLOOK OF GOLD 04 FEB 2016

“BUY GOLD 27260 TG 27350,27500 SL 26100”

Gold: Gold hit three-month highs on Wednesday, buoyed by a slower U.S. services sector and sinking dollar, prompting investors to seek shelter in assets perceived as safer as future Fed rate hikes appeared less likely. U.S. services sector activity slowed to a near two-year low in January, suggesting that economic growth weakened further at the start of the first quarter. The U.S. Federal Reserve's William Dudley told MNSI that financial conditions have tightened considerably since the Fed raised interest rates in December, and if that persists policymakers would have to take that into consideration when they meet in March. This prompted the market to scale back rate hike expectations.

The near-term outlook for gold will be largely influenced by the pace of U.S. interest rate rises. Higher rates would make gold less attractive as it would increase the opportunity cost of holding non-yielding assets. Non-farm payrolls data due out on Friday should give a clearer picture of the U.S. labor market.

Outlook :We expect gold prices to trade positive on the back of weak economic data from the US. Gold will witness more momentum if prices sustain above 27400 levels. Prices can rally towards 27625/27850 levels in that case. Support for the counter is seen around 26950. A daily close below this level will trigger a correction towards 26750 levels. Until then dips will find support between 27100—27000 zones.