Gold, silver prices rally for 4th straight week; yellow metal set to report best monthly gains in 10 months

At MCX, Gold June prices have near term resistance at Rs. 49200 per 10 grams and support at Rs. 48000 per 10 gram.

By Tapan Patel

Commodity prices traded higher during the week passed by with Bullion prices extended weekly gains after witnessing a minor correction in mid-week. Base metals complex edged higher recovering from recent lows on higher demand optimism. Crude oil prices rallied by more than 4% following strong US economic data.

Gold prices traded higher with spot gold prices at COMEX rose by 1.20% to $1904 per ounce for the week. Gold prices at MCX gained by 0.29% to Rs. 48542 per 10 gram as sharp rupee appreciation limited gains at the domestic market. The spot rupee rose by 0.55% against the dollar for the week reporting the fifth weekly gain. Gold ETF holdings were unchanged as holdings at SPDR Gold Shares were at 1043 tonnes for the week. The CFTC data showed that money managers increased their net long positions by 20007 lots in last week.

Silver prices edged higher with spot silver prices at COMEX ended 1.34% up at $27.94 per ounce for the week. MCX Silver May futures rose by 0.79% to Rs. 71611 per KG. Silver prices outperformed gold during the week following strong buying in industrial metals. The gold/silver ratio has declined to 68 so far after hitting record 130 levels. The CFTC data showed that money managers decreased their net long positions by 1235 lots in last week.

Bullion prices traded higher with gold prices rallied for the fourth week on the trot after prices breached key psychological resistance at $1900 per ounce. The inflation worries were the central point for this week’s bull in the precious metals. Gold prices are set to report the best monthly gains in 10 months with rise of 8% in the month of May. Bullion prices traded higher paring losses of the year on higher inflation concerns with rise in personal consumption expenditure and higher PCE numbers. The dollar index ended firmly above 90 mark while US 10 year treasury yields fell to 1.58% during the week. The precious metals will get support from inflation hedge as central banks are still in discussion on when to unwind the asset purchase program which we expect will come no sooner in this year.

We expect gold prices to trade sideways to up in the coming week with COMEX spot gold resistance at $1940 per ounce and support at $1860 per ounce. At MCX, Gold June prices have near-term resistance at Rs. 49200 per 10 grams and support at Rs. 48000 per 10 gram. COMEX silver spot has near-term resistance at $28.90 per ounce with support at $26.70 per ounce. MCX Silver July has important resistance at Rs. 74400 per KG and support at Rs. 69800 per KG.

(Tapan Patel is a Senior Analyst (Commodities) at HDFC securities. The views expressed are the author’s own. Please consult your financial advisor before investing.)