Gold, silver prices plunge as US dollar strengthens; bullion rates may trade sideways to down

Bullion prices witnessed sell-off during the week on stronger dollar and US FED’s hawkish stance. (Image: REUTERS)

By Tapan Patel

Commodity prices traded lower with most of the commodities in the non-agro segment witnessed selling except crude oil.  Bullion prices traded lower on stringer dollar on US Fed tapering signals while base metals traded weak on China crackdown and weak demand. Crude oil prices extended rally on strong fuel demand recovery form US and Europe. 

Gold prices traded lower with spot gold prices at COMEX plunged by 6.04% to $1764 per ounce for the week the worst in last 15 months. Gold prices at MCX ended more than 4% lower at Rs 46,728 per 10-gram limiting downside supported by rupee depreciation. The spot rupee fell by 1.07% against the dollar for the week continuing downside. Gold ETF holdings witnessed inflows as holdings at SPDR Gold Shares rose to 1053 tonnes from 1045 tonnes for the week. 

Silver prices joined the selloff in precious metals with spot silver prices at COMEX shed 7.63% ended at $25.79 per ounce for the week. MCX Silver July futures ended down by 6.41% to Rs 67,598 per KG. Silver prices traded lower following weak global cues on stronger dollar and selling in industrial metals.

Bullion prices witnessed sell-off during the week on stronger dollar and  US FED’s hawkish stance. The US Federal Reserve signalled, on Wednesday, that it will raise interest rates at least twice by the end of 2023 to 0.6% from current levels of zero to 0.25%. The comments from St. Louis Fed President James Bullard added pressure on Friday as he observed that the central bank might have to consider raising interest rates by next year instead of 2023. The market will focus on FED discussions on when it will start unwinding the monthly asset purchase programme. The dollar index rallied by 1.84% to 92.23 lowering demand for safe-haven assets like gold and silver.

We expect gold prices to trade sideways to down in the coming week with COMEX spot gold resistance at $1800 per ounce and support at $1720 per ounce. At MCX, Gold August prices have near term resistance at Rs 47,500 per 10 grams and support at Rs 46,000 per 10 gram. COMEX silver spot has near term resistance at $27 per ounce with support at $24.80 per ounce. MCX Silver July has important resistance at Rs 70,200 per KG and support at Rs 65,500 per KG.

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