Domestic gold and silver prices declined on Thursday, a day after the release of the minutes of the Federal Reserve’s latest policy meet. “A number” of US central bank officials are open to discussing tapering of stimulus if the recovery in the world’s largest economy holds up, according to the minutes.
MCX gold futures for June 4 delivery traded lower throughout the morning session, and were last seen quoting down Rs 255 or 0.52 per cent at Rs 48,419 per 10 grams. The contract moved between Rs 48,269 and Rs 48,619 as against its precious close of Rs 48,674.
MCX silver for July 5 delivery was down 0.53 per cent (Rs 384) at Rs 71,990 per kilogram at the time, having declined to as low as Rs 71,532 earlier.
Any monetary tightening by the Fed may mean a higher opportunity cost of holding bullion and, in turn, dent the appeal of the precious metals.
Weakness in domestic equities as well as the dollar overseas, however, provided some support to both metals.
“As inflation is rising at a significant rate there is news regarding tapering as well. Rising inflation and rising Covid-19 cases are supporting the prices although any further comments or action by the Fed in terms of change in policy could weigh on the metal,” said Navneet Damani, VP-Commodities Research, Motilal Oswal Financial Services.
In the international spot market, benchmark Comex gold and silver inched higher to quote at $1,871.41 per ounce and $27.75 at the time, respectively.
Back home, analysts expect some volatility in precious metals in the near term on currency fluctuations, but add that any dip can be used to take fresh positions.
Spot gold (22 carat) became dearer by Rs 237 to settle at Rs 47,994 per 10 grams in the national capital. Silver followed suit, rising by Rs 153 to Rs 71,421 per kilogram.
“If the Federal Reserve starts tapering bond buying, it could impact gold and silver prices again. We expect both the precious metals to remain volatile and the yellow metal could face stiff resistance around $1,900 per troy ounce.”
The rupee edged higher to end at 73.12 against the dollar amid weakness in the US currency, having moved in a tight range of 73.09-73.17 during the session.
The dollar index — which gauges the American currency against six major peers — was down 0.34 per cent at 89.89, close to its intraday low of 89.87.
Dalal Street extended losses to a second straight day amid a sharp selloff in metal stocks and profit booking in select heavyweights. The S&P BSE Sensex index slumped 0.68 to close at 49,564.86 and the broader NSE Nifty 50 benchmark slipped to 14,906.05, down 0.83 per cent.
Typically, losses in equities boost the safe-haven appeal of precious metals.
Where is the yellow metal headed?
Damani expects MCX gold to move between Rs 48,450 and Rs 49,050 per 10 grams in the near term.
The MCX June contract has support at Rs 48,480-48,300 and resistance at Rs 48,880-49,020, said Manoj Kumar Jain, Director-Head of Commodity Research, Prithvi Finmart. For silver, he sees support at Rs 71,700-71,100 and resistance at Rs 72,800-73,300 per kg.
Jain suggests selling MCX gold around Rs 48,850 for a target of Rs 48,330 with a stop loss at Rs 49,050.
Market participants keenly awaited US weekly jobless claims data due later in the day for cues.