Silver may benefit from speculative plays

Pattern of buying dips continue

Last week in India, the customs duty on gold was doubled. This caused  the yellow metal fall for the third week in a row. The prospect of further economic growth in the U.S. and the declining chances of another round of quantitative easing was discouraging for gold bulls too.

Investors have pushed the market lower to test the 1659 trend of higher lows from the 699 base of November 2008. From the year starting April 1, taxes will rise to 4% from 2% on gold bars and coins as well as platinum. The three biggest imports in India are Oil, Gold and Silver. As silver was left out of the latest budget tax increase it may benefit from speculative plays and the spread between gold and silver should narrow.

During the last three years Gold has fallen to test the long term trend from 2008 three times. The most severe test was in December 2011 when the precious metal fell seventeen dollars beneath the trend and closed beneath it for one week. However, then the market attracted buyers and the pattern of buying dips has continued since. A break beneath the trend at 1650.4 next week will have to be sustained by continued weakness for two complete weeks to trigger sustained losses.