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Gold futures test Rs 48,000/10 gm mark after US jobs data: Where is the yellow metal headed?

Gold futures test Rs 48,000/10 gm mark after US jobs data: Where is the yellow metal headed?

10 May 2021

Domestic gold futures moved higher on Monday as worse-than-expected US jobs data rekindled hopes of low interest rates in the world’s largest economy and, in turn, weakened the dollar.

MCX gold futures for June 4 delivery traded higher by Rs 236 or 0.49 per cent at Rs 47,987 per 10 grams at the last count in evening deals, having risen to as high as Rs 48,050 earlier in the day.

The silver contract for July 5 delivery on the bourse quoted at Rs 72,370 per kilogram, up by Rs 941 or 1.32 per cent on the day.

The dollar index – which gauges the greenback against six other currencies – fell as much as 0.15 per cent to a more than two-month low of 90.082 during the day.

The 10-year US bond yield slid to as low as 1.57 per cent.

Weakness in the US dollar makes precious metals more attractive for those holding other currencies.

Comex spot gold traded 0.35 per cent higher at $1,837.59 per ounce and silver up 0.73 per cent at $27.665 per ounce.

Analysts say disappointing jobs data from the US battered the US currency as well as US bond yields, underpinning gold.

Lower-than-expected nonfarm payrolls numbers came as a speed bump on investors hopes over roaring recovery in the world’s largest economy and tampered down bets over U.S. Federal Reserve tightening policy earlier than expected.

Non-farm payrolls increased by 2,66,000 last month after rising by 7,70,000 in March, according to the US labour department.

That meant US job growth unexpectedly slowed in April, likely curbed by shortages of workers and raw materials as rapidly improving public health and massive government aid fuelled an economic boom.

“After this weak data, we saw a mixed reaction from the Fed as few continued to keep the optimism high for the economic growth whereas others suggested caution,” said Navneet Damani, VP-Commodities Research, Motilal Oswal Financial Services.

Back home, spot gold (22 carat) added Rs 179 for the day to close at Rs 47,452 per 10 grams in the national capital, and silver climbed by Rs 826 to settle at Rs 71,541 per kilogram.

Dalal Street extended a rally to the fourth day in a row, boosted yet again by metal stocks, among others. The S&P BSE Sensex ended 0.60 per cent higher at 49,502.41 and the broader NSE Nifty 50 benchmark settled at 14,942.35, up 0.80 per cent.

Monday’s surge translated into a gain of 1,248.9 points or 2.59 per cent for the 30-scrip index in four days.

The rally on D-Street put some pressure on domestic gold and silver rates. as higher returns in equities typically aid investors’ risk appetite, moving them away from safety bets.

Where is the yellow metal headed?

Damani expects Comex spot gold to move within a range of $1,818-1,870 in the near term, and MCX gold between Rs 47,750- and Rs 48,220 per 10 grams.

Some analysts also say gold appears to be in a broader uptrend from a long-term perspective.

“Gold crossed the psychological resistance of $1,800 per ounce last week… We expect both the precious metals to remain volatile this week and any decline in the prices would be buying opportunity in gold and silver,” said Manoj Kumar Jain, Director-Head of Commodity Research, Prithvi Finmart.

“Gold could test Rs 48,700-49,000 levels in the near term and in around six months, Rs 50,000-51,000 is very much possible,” he added.

Technical view

The nearby month contract at MCX has support at Rs 47,550-47,400 and resistance at Rs 47,980-48,220, said Jain.

He recommends buying MCX gold around Rs 47,600 for a target of Rs 48,100 with a stop loss at Rs 47,300 and taking positions in silver around Rs 71,100 for a target of Rs 72,500 with a stop loss at Rs 70,400.