Bullion prices fall for third week straight on FED tapering talk; expect gold to trade sideways

Commodity prices traded mixed with bullion prices witnessed selling for the week capping upside on higher bond yields. (Image: REUTERS)

By Tapan Patel

Commodity prices traded mixed with bullion prices witnessed selling for the week capping upside on higher bond yields. Crude oil prices continued upside on supply crunch with output disruptions and higher demand. Base metals traded firm supported by lower supply while capping gains on China property giant Evergrande’s debt crisis. 

Gold prices traded weak with spot gold prices at COMEX ended 0.22% down to $1750 per ounce for the week. Gold October futures at MCX fell ended marginal up near Rs. 45995 per 10 gram supported by rupee depreciation. The spot rupee ended 0.26% lower against the dollar for the week. Gold ETF holdings witnessed outflows as holdings at SPDR Gold Shares declined to 993 tonnes from previous week’s 1002 tonnes. The CFTC data showed that money managers decreased their net long positions by 25801 lots in last week.

Silver prices traded steady with spot silver prices at COMEX ended marginal up at $22.42 per ounce for the week. MCX Silver September futures ended flat near to Rs. 59955 per KG for the week. Silver prices outperformed gold during the week with buying from support levels and firm industrial metals over lower supply worries. The CFTC data showed that money managers decreased their net long positions by 13178 lots in last week.

Bullion prices remained fluctuated reporting third weekly decline in a row on FED tapering jitters.  The precious metals traded higher in the start of the week on China’s property market debt crisis which raised concerns over economic recovery. Bullion prices traded under pressure paring gains with rally in US bond yields post US FOMC meeting. The US FED signalled to unwind pandemic stimulus by mid-2022 and to raise key interest rates by end of 2022. The dollar index rose by 0.14% to 93.33 for the week while US 10 year treasury yields rose to 1.45% during the week lowering demand for safe haven assets. However, US Fed chairman reiterated inflation worries as inflation was trending above the Fed’s target of 2% per annum. 

We expect gold prices to trade sideways to down in coming week with COMEX spot gold resistance at $1790 per ounce and support at $1680 per ounce. At MCX, Gold October prices have near term resistance at Rs. 46600 per 10 grams and support at Rs. 45500 per 10 gram. COMEX silver spot has near term resistance at $23.60 per ounce with support at $21.50 per ounce. MCX Silver December has important resistance at Rs. 63000 per KG and support at Rs. 58000 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.)