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Gold firms up above Rs 47,000/10 gm. Where is it headed in near term?

Gold firms up above Rs 47,000/10 gm. Where is it headed in near term?

03 May 2021

Domestic gold and silver prices moved higher on Monday amid strength in the rupee against the dollar and weakness in equities. Globally, the yellow metal rose on a pullback in the dollar and US Treasuries.

MCX gold futures for June 4 delivery gained by Rs 273 or 0.58 per cent to trade at Rs 47,010 per 10 grams at the last count, having risen to as high as Rs 47,197 earlier in the day.

The contract for August 5 delivery quoted at Rs 47,312, up Rs 261 or 0.55 per cent.

MCX silver (May 5) followed suit, rising by Rs 736 or 1.09 per cent at Rs 68,260. The July 5 contract quoted at Rs 69,101, up by Rs 735 or 1.08 per cent from its previous close.

“Rising inflation and personal incomes have supported gold prices at lower levels… Gold could hold a crucial support level of $1,750 per ounce on a closing basis.”

— Manoj Kumar Jain, Prithvi Finmart

Globally, spot gold was last seen trading near the day’s highest level at $1,782.65 per ounce, up by $13.68 or 0.77 per cent. Silver climbed as much as 1.19 per cent to $26.23 per ounce.

Back home, spot gold of 99.9 per cent purity quoted at Rs 46,960 per 10 grams and silver at Rs 68,297 per kilogram, excluding GST, according to Mumbai-based industry body IBJA.

Analysts say while an easing greenback overseas supported Comex prices, weakness on Dalal Street and appreciation in the rupee made the yellow metal more attractive.

The 30-scrip S&P BSE Sensex benchmark ended a highly volatile session 63.84 points lower at 48,718.52, a second straight negative close, though it recovered 690.45 points from the lowest level of the day.

Typically, precious metals share an inverse relationship with equities with any gains in stocks boosting the risk appetite of investors, moving them away from safe havens such as gold, and vice versa.

The rupee recovered initial losses to end stronger by 14 paise at 73.95 against the greenback. The dollar retreated after a recent bounce as investors made a cautious start to a week crammed with central bank meetings and big-ticket US economic data.

The dollar index — which gauges strength in the US currency against six major peers overseas — was last down 0.19 per cent at 91.09, after dipping to as low as 91.07 earlier on Monday.

Weakness in the dollar makes the yellow metal cheaper for those dealing in other currencies.

What analysts say

“Where on one side, the Fed Governor is continuously downplaying inflation, on the other, US Treasury Secretary Janet Yellen has tamped down concerns that President Biden’s plans for infrastructure, jobs and families will cause inflation, saying the spending will be phased in over a decade,” said Navneet Damani, VP-Commodities Research, Motilal Oswal Financial Services.

He expects gold to move in a broader range of $1,758-1,800 per ounce on COMEX (Rs 46,760-47,220 per 10 grams on MCX) in the near term.

Gold and silver are expected to remain volatile this week amid volatility in the dollar index and bond yields, said Manoj Kumar Jain, Director-Head of Commodity Research, Prithvi Finmart.

Technical outlook

“MCX gold finds support at Rs 46,550-46,330 and resistance at Rs 46,920-47,100, and silver at Rs 67,900-67,500 and Rs 68,800-69,400, respectively,” said Jain, who suggests buying the yellow metal around Rs 46,550 for a target of Rs 47,000 with a stop loss at Rs 46,300.

Market participants will closely monitor manufacturing and services PMI data from major economies due this week for cues.

Analysts say gold is poised for higher levels over the medium term amid uncertainty around the violently-spreading coronavirus pandemic.