Gold prices hit fresh high of Rs 56,126, silver up Rs 1,396

Gold prices continued to rise for the eighth day to hit a new high of Rs 56,126 per 10 gram in the Mumbai bullion market on uncertainty over coronavirus relief package and increasing US-China tension.

The spot gold touched a new high of $2,075.14 in the London market on August 7 as investors shifted towards safe-haven bullion on rising coronavirus cases amid falling bond yields and decline in the US dollar.

Gold-backed ETF and similar products recorded eight consecutive months of positive flows, adding 166 tonnes or 4 percent assets under management (AUM) equivalent to $9.7 billion in July, according to World Gold Council.

Gold prices have been scaling new peaks every few weeks. The yellow metal has rallied more than Rs 1,000 per 10 gm in the last two trading sessions.

At home, MCX gold has peaked Rs 56,000 while Comex gold is trading well above the $2,000 mark. Gold has rallied nearly 43 percent since the start of the year and is on track for the best year in many decades.

“The relentless rally in gold prices is primarily due to two reasons—the number of COVID19 cases rising globally and fear of situation going out of control. Lack of clarity on the vaccine is also not helping the situation. On the other hand, a weak dollar has pushed prices further up," said Nish Bhatt, Founder & CEO, Millwood Kane International.

“The dollar index is slipping and trading near two-year low and has helped the gold rally in a big way. Also, the delay and lack of consensus in the US government on the new stimulus package has created uncertainty in the mind of investors. A stimulus is required to boost demand and bring back the economy on track. Negative interest rates in most developed countries and geo-political risk between the US and China have only added to worry," he added.

The rate of 10 gram 22-carat gold in Mumbai was Rs 51,411 plus 3 percent GST, while 24-carat 10 gram was Rs 56,126 plus GST. The 18-carat gold quoted at Rs 42,095 plus GST in the retail market.

“In the early morning session itself, gold prices scaled a new all-time peak and was set for its ninth straight weekly gain, as demand was boosted by a softer dollar, falling US Treasury yields and worries over the global economic fallout from rising COVID-19 cases," Navneet Damani, Vice President, Motilal Oswal, said.

The benchmark 10-year treasury yields fell to their lowest in five months, reducing the opportunity cost of holding non-interest bearing gold. Many US officials have backed an additional boost to cope with the fallout of the pandemic, though Republicans and Democrats remained far apart on what to include in the stimulus, he said.

All eyes will be on the US non-farm payroll data. If it is better than expected, it can trigger volatility in the metal. The broader trend on Comex could be in the range of $2045-2085 and on domestic front prices could hover in the range of Rs 55,950- 56,550.

“Comex gold December contract trades marginally higher as a slight rebound in the US dollar Index has pared the early gains in the yellow metal. Spot gold has hit a fresh record high level near $2075/oz. Although gold continues to set new highs on persistent weakness in the Dollar, lower real rates and strong investor interest amid safe-haven buying some caution is warranted ahead of today’s key US non-farm payrolls data," said Ravindra Rao, VP- Head Commodity Research at Kotak Securities.

The gold/silver ratio stands at 74.82 to 1, which means the amount of silver required to buy one ounce of gold.

Silver prices jumped Rs 1,396 to Rs 75,013 per kg from their closing on August 6.

In the futures market, gold touched an intraday high of Rs 56,191 and an intraday low of Rs 55,506. For the October series, the yellow metal touched a low of Rs 45,596 and a high of Rs 55,191.

Gold futures for October delivery slipped Rs 116, or 0.21 percent, at Rs 55,729 per 10 gram in evening trade on a business turnover of 16,549 lots. The same for December delivery declined Rs 90, or 0.16 percent, at Rs 55,925 on a business turnover of 1,239 lots.

The value of the October and December contracts traded, so far, is Rs 4,359.02 crore and Rs 80.11 crore, respectively.

Similarly, Gold Mini contract for September edged lower Rs 67, or 0.12 percent at Rs 56,050 on a business turnover of 15,772 lots.

MCX Gold will trade in a sideways range for the session, with support placed at Rs 55,230-54,870, whereas resistance is at Rs 56,080-56,350, according to Motilal Oswal.

At 1218 GMT, spot gold was down $10.63 at $2,052.55 an ounce in London trading.