Gold rises to Rs 47,260 per 10 gram, silver up Rs 1,320 per kg

Gold prices rose Rs 431 to Rs 47,260 per 10 gram in the Mumbai bullion market on a weaker rupee versus the dollar and as investor seeks refuge in the safe-haven metal as fear of a recession grow.

Traditionally, gold is seen as a hedge against inflation. But lack of return from other asset classes has pushed investments in favour of the yellow metal.

Prices were steady as a rising dollar offset support for the metal from easing equities and growing concerns of a global recession.

The US has levied sanctions on China for working with Iran's airline company. This continuous friction between the US and China is supporting the precious metals pack.

US homebuilding dropped by the most on record in April and permits for future construction tumbled, underlining fears that the coronavirus crisis would lead to the deepest economic contraction in the second quarter since the Great Depression.

Market participants will keep an eye on the FOMC meeting minutes scheduled for later on May 20.

The rate of 10 gram 18, 22 and 24-carat gold in Mumbai was Rs 35,445, Rs 43,290 and Rs 47,260, respectively, plus 3 percent GST.

Navneet Damani, Vice President, Motilal Oswal, expects domestic front prices could hover in the range of Rs 47,100-47,625 per 10 gm.

Ravindra Rao, VP-Head Commodity Research at Kotak Securities, expects gold to trade sideways on May 20 amid mixed cues. "However the overall bias may be strong amid lingering worries over the virus and its impact on global health."

The gold/silver ratio currently stands at 98.21 to 1, which means the amount of silver required to buy one ounce of gold.

Silver prices jumped Rs 1,320 to Rs 48,120 per kg from its closing on May 19.

In the futures market, gold rate touched an intraday high of Rs 47,354 and an intraday low of Rs 46,800 on the Multi-Commodity Exchange (MCX). For the June series, the yellow metal touched a low of Rs 36,572 and a high of Rs 47,980.

Gold futures for June delivery gained Rs 227, or 0.48 percent, at Rs 47,277 per 10 gram in evening trade on a business turnover of 11,570 lots. The same for August delivery was up Rs 239, or 0.51 percent, at Rs 47,542 on a business turnover of 10,285 lots.

The value of the June and August contracts traded so far is Rs 2,459.55 crore and Rs 411.32 crore, respectively.

Similarly, Gold Mini contract for June rose Rs 215, or 0.46 percent at Rs 47,251 on a business turnover of 9,063 lots.

Tapan Patel, Senior Analyst (Commodities), HDFC Securities, sees support for MCX June Gold futures at Rs 46,800 and resistance at Rs 47,500 levels. Motilal Oswal too sees support at Rs 46,900 and resistance at Rs 47,500 levels.

Speaking on how the trade channel is performing, TS Kalyanaraman, Chairman & Managing Director, Kalyan Jewellers, said of the company’s 144 showrooms globally, 62 are open. Looking at current trend, he is fairly optimistic and expects the jewellery sector to revive from this global pandemic faster and stronger than any other luxury business.

At 12:13 pm (GMT), spot gold was up by $6.77 at $1,751.30 an ounce in London trading.

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