Gold price falls as FED speculation keeps pressure on metals, expect prices to move sideways to down

Gold prices traded lower with spot gold prices at COMEX fell by more than 1% to $1783 per ounce for the week. (Image: REUTERS)

By Tapan Patel

Commodity prices traded lower with most of the commodities in the non-agro segment continued downside for the week. Bullion prices traded weak with silver falling the most following selling in base metals. Base metals traded mixed on demand worries and lower inventories which capped downside. Crude oil prices extended loses on higher supply pressure and demand growth worries over omicron virus.

Gold prices traded lower with spot gold prices at COMEX fell by more than 1% to $1783 per ounce for the week. Gold February futures at MCX ended 0.07% lower at Rs. 47925 per 10-gram capping downside on rupee depreciation. The spot rupee ended 0.40% lower at 75.17 against the dollar for the week. Gold ETF holdings witnessed outflows as holdings at SPDR Gold Shares fell to 984 tonnes from the previous week’s 993 tonnes. The CFTC data showed that money managers decreased their net long positions by 13737 lots in last week. 

Silver prices extended fall with spot silver prices at COMEX fell by 2.73% at $22.52 per ounce for the week. MCX Silver March futures declined by 2.22% to Rs. 61567 per KG for the week. Silver prices underperformed gold with selling in industrial metals on demand worries on virus threat. The CFTC data showed that money managers decreased their net long positions by 2309 lots in last week. 

Bullion prices traded lower for the third consecutive week as stronger dollar and FED speculation kept precious metals under pressure during the week. Bullion prices capped downside witnessing recovery on Friday with fall in US bond yields and growing omicron virus worries across globe. The International Monetary Fund even said the Omicron variant was likely to reinforce the IMF’s decision to downgrade global growth forecasts it made in October. The 10-year bond yields fell to 1.356%, which also keeps inflation-adjusted yields in negative territory boosting buying in precious metals. The traders and investors will await for US FOMC meeting outcome to gauge any hint over interest rate hike. The Fed Chair Jerome Powell told lawmakers this week that officials should consider speeding up the taper of bond buying at their upcoming meeting Dec. 14-15 to wrap it up a few months earlier than initially planned.  

We expect gold prices to trade sideways to down in coming week with COMEX spot gold resistance at $1833 per ounce and support at $1760 per ounce. At MCX, Gold February prices have near term resistance at Rs. 47800 per 10 grams and support at Rs. 46500 per 10 gram. COMEX Spot silver has near term resistance at $23.60 per ounce with support at $21.40 per ounce. MCX Silver March has important resistance at Rs. 63500 per KG and support at Rs. 59800 per KG.

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