Gold futures slide below Rs 47,450/10 gm mark. Should you trade?

Domestic gold and silver futures struggled below the flatline amid a rebound in equities although strength in the rupee offered some support. Globally, analysts awaited the outcome of a scheduled policy meeting by the Federal Reserve for more clarity on interest rates going forward. gold futures for delivery on June 4 declined by Rs 121 or 0.25 per cent to quote at Rs 47,411 per 10 grams at the last count. The August 5 contract eased by Rs 133 or 0.28 per cent to Rs 47,700 per 10 grams.

Silver followed suit, falling by Rs 252 or 0.37 per cent to Rs 68,422 per kilogram.

Appreciation in the rupee amid some weakness in the dollar failed to prop up prices of precious metals amid gains on Dalal Street, where benchmark indices clocked their sharpest single-day jump in nearly two weeks as investors cheered ICICI Bank’s strong Q4 earnings.

Typically, precious metals share an inverse relationship with equities, as higher returns in shares affect their safe-haven appeal.

In the international market, spot gold was last seen quoting at $1,777.41 per ounce, down 30 cents from its previous close, but silver eked out a gain of 5 cents to $26.09 per ounce. Palladium jumped by $32 or 1.12 per cent to $2,889 per ounce, having registered a record peak of $2,925.14 per ounce last Friday.



Back home, gold and silver of 99.9 per cent purity stood at Rs 47,351 per 10 grams and Rs 68,425 per kilogram in the spot market, respectively, according to Mumbai-based India Bullion and Jewellers Association (IBJA), an industry body. Both prices exclude GST.

Analysts, however, said gold may trade sideways this week amid currency fluctuations.

“While no major policy changes are expected from the Fed, investors are paying close attention on comments regarding liquidity measures and inflation,” said Navneet Damani, VP-Commodities Research, Motilal Oswal Financial Services.

The US central bank’s policy meeting will conclude on April 28.

“India continues to record the world’s highest daily tally of Covid-19 infections, which has also forced the country to take stricter measures to curb the spread of the same. These restrictions and the rise in cases could hamper the physical demand,” added Damani, who expects a broader range of $1,772-1,797 per ounce on COMEX gold (Rs 47,350-47,780 per 10 grams in domestic rates) in the near term.

Many analysts believe the yellow metal is in a broader positive and may test higher levels over the medium term amid uncertainty surrounding the pandemic.

“Both precious metals are expected to remain volatile this week amid volatility in the dollar index and the rupee. Rising coronavirus cases in Asia could support prices of both,” said Manoj Kumar Jain, Director-Head of Commodity Research, Prithvi Finmart.

Technical view

According to Jain, gold has support at $1,762-1,750 (Rs 47,330-47,150 on MCX) and resistance at $1,792-1,804 per ounce (Rs 47,770-48,000), and silver at $25.70-25.40 and $26.44-26.80 per ounce, respectively.

“We suggest buying in gold on dips around Rs 47,400 for a target of Rs 47,850 with a stop loss at Rs 47,150,” he said.

Meanwhile, the rupee gained by 28 paise to finish at 74.73 against the dollar for the day, following four sessions of losses.

The dollar index – which measures strength in the greenback against six major peers – was steady at 90.85.

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