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Gold futures test Rs 47,650/10 gm mark as dollar eases, silver rises too: Time to take positions?

Gold futures test Rs 47,650/10 gm mark as dollar eases, silver rises too: Time to take positions?

14 May 2021

Domestic gold and silver prices registered mild gains on Friday amid a weakening dollar that made the yellow metal more attractive for those holding other currencies. A sluggish trend in domestic equities along with a mild gain in the rupee supported bullion prices.

MCX gold futures for June 4 delivery were last seen quoting at Rs 47,617 per 10 grams, up by Rs 179 or 0.38 per cent from their previous close, having jumped to as high as Rs 47,650 earlier on Friday.

MCX silver (July 5) traded higher by Rs 493 or 0.70 per cent at Rs 70,966 per kilogram at the time.

Comex spot gold traded 0.47 per cent higher at $1,835.22 per ounce while silver was up 0.62 per cent for the day at $27.26 per ounce.

The dollar index — which gauges the dollar against six major peers — slid as much as 0.35 per cent to 90.42 on Friday, easing further from a one-week peak.

A Fed official said the US central bank will not hike rates until inflation comes in above targeted levels for a long time, following a spike in inflation in the world’s largest economy.

Back home, spot gold (22 carat) became dearer by Rs 146 to settle at Rs 47,110 per 10 grams in the national capital for the day. Silver followed suit, gaining by Rs 513 to Rs 70,191 per kilogram.

Dalal Street ended a volatile day nearly unchanged as investors remained cautious about the prospects of recovery amid the second wave of Covid-19 infections.

The S&P BSE Sensex index eked out a gain of 0.09 per cent to settle at 48,732.55 whereas the broader NSE Nifty 50 benchmark slipped 0.13 per cent to 14,677.80. Typically, a lacklustre trend in stocks boosts the safe-haven allure of bullion.

The rupee ended stronger by 13 paise against the US currency at 73.29.

Analysts expect gold and silver to remain volatile in the near term with a positive bias on currency fluctuations.

“We expect the dollar index to remain volatile amid rising inflation and recovery in the US economy. It could face stiff resistance around 91.00 levels… Inflation concerns also restrict gains in the rupee,” said Manoj Kumar Jain, Director-Head of Commodity Research, Prithvi Finmart.

Earlier this week, higher-than-expected inflation print in the US surprised analysts and caused tremors in the financial markets. Market participants assessed if rising inflation in the US would trigger tapering of stimulus measures by major central banks.

The markets are seeing some tranquility today as inflation fears seem to have receded if not disappeared, Kotak Securities said in a note. “The continuing emphasis of central banks on keeping interest rate low and playing down inflation concerns has helped the markets retain their calm. A number of Fed officials spoke this week and most maintained a dovish stance,” the brokerage added.

Technical view

The nearby month contract at MCX has support at Rs 47,200-47,050 and resistance at Rs 47,700-47,880, said Jain. For silver, support is seen at Rs 70,000-69,500 and resistance at Rs 70900-71400 per kg, he said.

He recommends buying MCX gold around Rs 47,330 for a target of Rs 47,700 with a stop loss at Rs 47,050 and going long on silver around Rs 70,000 for a target of Rs 71,400 with a stop loss at Rs 69,400.

Market participants will monitor US data on industrial production and retail sales due later in the day.