Gold prices rise, helped by weaker dollar; expect bullion prices to gain this week

Bullion prices witnessed strong recovery in the last three trading days of the week supported by a weaker dollar. (Image: REUTERS)

By Tapan Patel

Commodity prices traded mixed with most of the commodities in the non-agro segment witnessed recovery from lower levels during the week. Bullion prices rebounded from recent lows supported by a weaker dollar. Crude oil and base metals reported firm trading range halting declines outweighing rising COVID cases worries.

Gold prices traded higher with spot gold prices at COMEX ended up by 0.95% to $1780 per ounce for the week witnessing a strong recovery from “flash crash”. Gold October futures at MCX rose by 0.64% at Rs 46,940 per 10 gram along with rupee depreciation. The spot rupee ended around 0.12% weaker against the dollar for the week. Gold ETF holdings witnessed outflows as holdings at SPDR Gold Shares fell to 1022 tonnes from the previous week’s 1025 tonnes for the week. The CFTC data showed that money managers decreased their net long positions by 55649 lots in last week.

Silver prices declined with spot silver prices at COMEX fell by 2.39% to $23.75 per ounce for the week. MCX Silver September futures fell by 2.71% to Rs 63,238 per KG. Silver prices traded under pressure on weak base metals and lower demand outlook. Prices pared some loses in last trading day with recovery in gold prices and base metals. The CFTC data showed that money managers decreased their net long positions by 13994 lots in last week.

Bullion prices witnessed strong recovery in the last three trading days of the week supported by a weaker dollar. The major boost in prices came on deteriorated US consumer sentiment despite of improved job market. U.S. consumer sentiment fell in early August to the lowest level in nearly a decade as Americans grew more concerned about the economy’s prospects, inflation and the recent surge in coronavirus cases. The precious metals got support from dollar decline and fall in US treasury yields. The US 10 year treasury yields ended at 1.286% while the dollar index fell by 0.30% to 92.52 for the week. Bullion prices may further add risk premium over rising worries over fast-spreading Delta variant across the globe. 

We expect gold prices to trade higher in the coming week with COMEX spot gold resistance at $1810 per ounce and support at $1750 per ounce. At MCX, Gold October prices have near term resistance at Rs 47,500 per 10 grams and support at Rs 46,400 per 10 gram. COMEX silver spot has near term resistance at $24.60 per ounce with support at $22.90 per ounce. MCX Silver September has important resistance at Rs 65,800 per KG and support at Rs 61,800 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.)