Gold prices fall 3.59% as dollar soars; silver tumbles 4.79%

Gold prices dropped for the third successive day by Rs 290 to Rs 47,266 per 10 gram at the Mumbai retail market on sharp appreciation in rupee, however buying emerged at lower levels. The yellow metal ended the week with a loss of Rs 1,762 or 3.59 percent.

The rate of 10 gram 22-carat gold in Mumbai was Rs 43,296 plus 3 percent GST, while 24-carat 10 gram was Rs 47,266 plus GST. The 18-carat gold quoted at Rs 35,450 plus GST in the retail market.

On the data front, a Labour Department reported that the number of Americans filing unemployment benefit rose by 37,000 to 412,000 last week.

The US dollar recovered and soared above 92 mark at 92.04, up 0.19 percent against a basket of six rival currencies. The stronger greenback makes bullion metal less attractive for other currency holders.

Gold holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund fell by 3.8 tonnes to 1,041.99 tonnes. The ETF has a market value of $59.57 billion.

Spot gold jumped $5.64 to $1,778.95 an ounce at 1241 GMT in London trading.

MCX Bulldesk climbed 82 points or 0.57 percent, at 14,575 at 15:52. The index tracks the real-time performance of MCX Gold and MCX Silver futures.

“Gold prices traded steady, after a steep fall witnessed in the previous session, as the US Fed policy meet bolstered the dollar and dented bullion’s appeal as an inflation hedge. The dollar index hit a two-month high and was headed for its best week in nearly nine months; whereas interestingly US yields witnessed a fall hovering around the 1.5 level. Fed announced no changes in the interest rate or their monthly $120 bond purchases although, some concerns regarding tapering in the market have weighed on the metal,” said Navneet Damani, VP – Commodities Research at Motilal Oswal Financial Services.

Along with the Fed projection showing two rate hikes in 2023, they have also increased their GDP and inflation forecast amidst the recovery seen in the US economy. Talks between US President Biden and his Chinese counterpart XI Jinping could be expected soon as the two countries spar over issues including human rights, a US official said.

The broader range on COMEX could be between $1,770 and $1,808 and on the domestic front prices could hover in the range of Rs 46,650- 47,350

“COMEX gold continues to trade higher near $1791/oz adding to the morning gains. Gold has edged up on bargain buying and pause in the US dollar’s recent gains, renewed virus concerns and mixed economic data. However, Fed’s monetary tightening expectations and weaker investor interest as is evident from ETF outflows might cap the gains. Gold is seeing some relief rally; however, general bias may remain on downside unless the US dollar corrects sharply,” said Ravindra Rao, CMT, EPAT, VP- Head Commodity Research at Kotak Securities.

The gold/silver ratio currently stands at 68.81 to 1, which means 68.81 ounces of silver is required to buy an ounce of gold.

Silver prices tumbled by Rs 833 to Rs 68,687 per kg against its closing price on June 17. The white metal plunged Rs 3,452 or 4.79 percent in the week.

In the futures market, the gold rate touched an intraday high of Rs 47,387 and an intraday low of Rs 46,900 on the Multi-Commodity Exchange (MCX). For the August series, the yellow metal touched a low of Rs 44,501 and a high of Rs 49,721.

Gold futures for August delivery fell marginally by Rs 38, or 0.08 percent, to Rs 46,920 per 10 gram in evening trade on a business turnover of 10,988 lots. The same for October slipped Rs 68, or 0.14 percent, to Rs 47,208 on a business turnover of 3,385 lots.

The value of August and October’s contracts traded so far is Rs 1,852.30 crore and Rs 69.75 crore, respectively.

Similarly, Gold Mini contract for July gained Rs 3, or 0.01 percent at Rs 46,784 on a business turnover of 16,267 lots.

Trading Strategy

Tapan Patel- Senior Analyst (Commodities), HDFC Securities

We expect gold prices to trade sideways to up for the day with COMEX gold support at $1770 and resistance at $1800 per ounce. MCX Gold August support lies at Rs. 46800 and resistance at Rs.47500 per 10 gram.

Kshitij Purohit, Product Manager, Currency & Commodities, CapitalVia Global Research Limited

Technically, International gold is trading with bearish momentum near $1,800 levels and may continue to decline and test $1,770 levels. On the domestic front, MCX August Gold has been sustaining below 50-SMA and the market declined more than 1500 points in the previous close. We may witness bears dominating the evening session where the ‘sell on rise’ strategy could be followed.

For all commodities-related news, click here