Domestic gold and silver prices slumped more than 1 per cent on Monday amid equities touching fresh highs and a strengthening dollar overseas, as market participants awaited the outcome of the Federal Reserve’s policy review due later this week.
MCX gold futures for delivery on August 5 eased by Rs 548, or 1.12 per cent, to Rs 48,355 per 10 grams in early trade during the evening session, having moved between Rs 48,310 and Rs 48,750 earlier on Monday as against their previous close of Rs 48,903.
MCX silver futures for July 5 delivery were down by Rs 763 or 1.06 per cent at Rs 71,464 per kilogram at the time. Earlier in the day, the contract had moved in a Rs 650 range, gyrating between Rs 71,350 and Rs 72,000 as against its previous close of Rs 72,227.
In the international market, spot gold traded 1.45 per cent lower at $1,850.52 per ounce at the last count while silver was down 1.36 per cent at $27.56 per ounce.
Back home, spot gold (22 carat) declined by Rs 464 to Rs 47,705 per 10 grams in New Delhi, while silver dropped by Rs 723 to Rs 70,420 per kg.
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On Dalal Street, benchmark indices extended their winning run to a third straight day. The S&P BSE Sensex index rose 76.77 points or 0.15 per cent to end a volatile session at 52,551.53 and the broader NSE Nifty50 added 12.50 points to settle at 15,811.85 — both record closing highs.
Typically, gains in equities boost the risk appetite of investors, moving them away from safety bets such as precious metals.
The rupee weakened by 22 paise to end at 73.29 against the dollar, depreciating for a fifth straight day. It had moved between 73.10 and 73.29 during the session. The dollar index was little changed after posting its biggest weekly rise in six weeks. Strength in the US currency makes gold less attractive for those dealing in other currencies.
“Demand for physical gold is seeing a rise in top hubs like India and China, although dealers are still forced to offer discounts, while businesses limp back to life in India as some Covid-19 restrictions were eased,” said Navneet Damani, VP-Commodities Research,
Analysts expect bullion prices to remain volatile this week ahead of the Federal Reserve’s policy meet. The US central bank is widely expected to leave the key interest rates unchanged after its scheduled review on June 15-16.
“The higher-than-expected consumer price reading in the US is discounted by traders, as most analysts assume that the current spike in the prices of goods and services is temporary and not sustainable… gold expected to hold crucial support at $1,850 per troy ounce,” said Manoj Kumar Jain, Director-Head of Commodity Research, Prithvi Finmart.
At MCX, gold has support at Rs 48,750-48,550 and resistance at Rs 49,100-49,380, and silver support at Rs 71,700-71,200 and resistance at Rs 72,500-73,100, said Jain, who suggests buying the yellow metal futures on dips to around Rs 48,750 for a target of Rs 49,200 with a stop loss at Rs 48,50.
Damani expects a broader range of $1,855-1,885 per ounce on COMEX gold (Rs 48,240- 48,880 per 10 grams on MCX) in the near term.