Gold price fall from 5-week high as dollar strengthens; bullions may trade under pressure this week

Gold ETF holdings were unchanged as holdings at SPDR Gold Shares were at 1043 tonnes for the week. (Image: REUTERS)

By Tapan Patel

Commodity prices traded weak with most of the commodities in Non-Agro segment ended in red for the week except Crude oil. Crude oil prices rallied on strong demand outlook in the second half of the year. Bullion prices traded under pressure on stronger dollar following robust economic data while base metals fell on fear of policy change from central banks and weak China demand.

Gold prices traded weak with spot gold prices at COMEX fell by 0.64% to $1891 per ounce for the week. Gold prices at MCX ended in green at Rs 48,600 per 10 gram as rupee depreciation supported gold prices at domestic market. The spot rupee fell by 0.78% against the dollar for the week after rallying for the five weeks on the trot. 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 2943 lots in last week.

Silver prices ended lower with spot silver prices at COMEX fell by 0.51% at $27.79 per ounce for the week. MCX Silver July futures ended marginal down to Rs 71,539 per KG. Silver prices witnessed decline following weak industrial metals and fall in precious metals. The CFTC data showed that money managers decreased their net long positions by 2765 lots in last week. 

Bullion prices traded under pressure during the week with gold prices falling from five weeks high on risk-on sentiments. The precious metals prices declined after strong US manufacturing data raised market expectations of unwinding of stimulus measures. The US private job market data came lower than market forecasts which supported bullion prices to pare some weekly losses. The stronger than expected data lifted economic growth outlook which pushed dollar index and bond yields higher. The dollar index ended firm above 90 mark with 0.12% gains while US 10 year treasury yields ended at 1.55% after hitting 1.64% during the week. The lesser than expected US non-farm payroll data signalled long way for economic recovery keeping FED’s hands tied to change monetary policy.

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 $1850 per ounce. At MCX, Gold August prices have near term resistance at Rs 49,200 per 10 grams and support at Rs 48,000 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 74,400 per KG and support at Rs 69,800 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.)