Gold prices to trade sideways, support at 47200, silver outperforms yellow metal; watch out for these levels

Bullion prices traded higher during the week supported by weaker dollar and inflation worries despite the rise in US bond yields.

By Tapan Patel

Commodity prices traded mixed with bullion and crude oil prices traded higher during the week while base metals ended in red witnessing selling. Bullion prices gained on a weaker dollar while crude oil prices rallied on higher demand optimism. Base metals traded weak on higher supply expectations with eased worries over coal shortage in China.

Gold prices traded firm with spot gold prices at COMEX rose by 1.42% to $1793 per ounce for the week. Gold December futures at MCX ended 1.24% up to Rs. 47797 per 10 gram limiting gains on rupee appreciation. The spot rupee rose by 0.48% to 74.90 mark against the dollar for the week. Gold ETF holdings continued outflows as holdings at SPDR Gold Shares declined to 978 tonnes from previous week’s 980 tonnes. The CFTC data showed that money managers decreased their net long positions by 536 lots last week.

Silver prices traded higher with spot silver prices at COMEX rallied by 4.35% at $24.32 per ounce for the week. MCX Silver December futures rose by 3.77% to Rs. 65656 per KG for the week. Silver prices outperformed gold on higher demand in industries despite selling in base metals. The CFTC data showed that money managers increased their net long positions by 14636 lots last week.

Bullion prices traded higher during the week supported by weaker dollar and inflation worries despite the rise in US bond yields. The precious metals kept a firm trading range despite positive equity indices and eased concerns over China’s Evergrande debt crisis. Bullion prices added a risk premium after Russia and some parts of Europe imposed COVID restriction with rise in virus cases. Bullion prices got a final boost on Friday after US FED chairman Jerome Powell confirmed the central bank’s plans to start tapering its monthly stimulus of $120 billion between November and December. The traders and investors remained vary over FED stance as Mr Powell didn’t indicate any timeline for rate hike. The dollar index ended 0.31% lower while 10 year US Treasury yields rose to 1.638% on Friday.

We expect gold prices to trade sideways to up in the coming week with COMEX spot gold resistance at $1833 per ounce and support at $1770 per ounce. At MCX, Gold December prices have near term resistance at Rs 48200 per 10 grams and support at Rs 47200 per 10 gram. COMEX silver spot has near term resistance at $25.20 per ounce with support at $23.50 per ounce. MCX Silver December has important resistance at Rs 67000 per KG and support at Rs 62800 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.)