-By Tapan Patel
Commodity prices traded lower with most of the commodities in non-agro segment witnessed selling for the week except crude oil. Bullion prices declined responding to the US FOMC outcome with hawkish FED while base metals traded lower as stronger dollar lowered demand for commodities. Crude oil prices extended gains rallying to seven year highs on tight supply and geopolitical tensions. Gold prices traded lower with spot gold prices at COMEX fell by 2.39% to $1792 per ounce for the week. Gold February futures at MCX ended 1.32% down at Rs. 47611 per 10 gram as rupee depreciation capped downside. The spot rupee fell by 0.83% up at 75.04 against the dollar for the week.
Gold ETF holdings witnessed inflows as holdings at SPDR Gold Shares rose to 1014 tonnes from previous week’s 1008 tonnes. The CFTC data showed that money managers have increased their net long positions by 33169 lots in last week. Silver prices declined the most among the non-agro segment with spot silver prices at COMEX plunged by 7.51% to $22.47 per ounce for the week. MCX Silver March futures ended 5.82% lower to Rs. 61034 per KG for the week. Silver prices witnessed additional selling pressure with a fall in industrial metals over a stronger dollar. The CFTC data showed that money managers have increased their net long positions by 3613 lots in last week.
Bullion prices traded lower with Gold prices halted two weeks rally witnessed sharp selling on hawkish Fed as rate hike is imminent. The Federal Reserve unveiled this week a new hawkish era for U.S. monetary policy, with Chairman Jerome Powell hinting a series of rate hikes will be needed now to curb price pressures ramping up as a result of the trillions of dollars of pandemic relief spending. Gold prices fell below $1800 per ounce with dollar rallying on rate hike expectations. The dollar index rose by 1.70% to 97.27 while US 10 year treasury yields ended at 1.78% for the week. The higher inflation and expanded FED balance sheet may continue to support precious metals as inflation hedge for medium term.
We expect gold prices to trade sideways to down in coming week with COMEX spot gold resistance at $1830 per ounce and support at $1780 per ounce. At MCX, Gold April prices have near term resistance at Rs 48000 per 10 grams and support at Rs. 47200 per 10 gram. COMEX Spot silver has near term resistance at $24.100 per ounce with support at $22 per ounce. MCX Silver March has important resistance at Rs. 63800 per KG and support at Rs 59800 per KG.
(Tapan Patel, Senior Analyst (Commodities), HDFC Securities. Views expressed are the author’s own.)
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