Gold, silver futures struggle near flatline as equities rally: What analysts say

Gold, silver futures struggle near flatline as equities rally: What analysts say

Domestic gold futures were stuck in a narrow range around the flatline on Tuesday as investors awaited the outcome of a scheduled policy meeting by the Federal Reserve due the next day.

A mild gain in the rupee despite strength in the dollar overseas provided some support to the yellow metal, but an extended rally on Dalal Street played spoilsport.

MCX gold futures for delivery on June 4 eased by Rs 17 or 0.04 per cent to Rs 47,445 per 10 grams at the last count, having moved within a range of Rs 168, between Rs 47,318 and Rs 47,486, earlier in the day as against their previous close of Rs 47,462.

The August 5 contract quoted at Rs 47,735 per 10 grams, lower by Rs 19 or 0.04 per cent from its previous close.

Silver eked out a mild gain amid volatile trade, up by Rs 120 or 0.17 per cent at Rs 68,800 per kilogram after gyrating within a Rs 488 range.

On Dalal Street, both benchmark indices registered sharp gains for a second straight day amid buying across sectors and continuing inflows by domestic institutional investors.
Typically, precious metals share an inverse relationship with equities, as higher returns in shares affect their safe-haven appeal.

The rupee appreciated for a second straight day, gaining 7 paise to close at 74.66 against the US currency, which was steady near 90.84 after circling in a tight range. Strength in the greenback makes the precious metals more expensive for those dealing in other currencies.

Domestic spot gold and silver of 99.9 per cent purity stood at Rs 47,353 per 10 grams and Rs 68,565 per kilogram, respectively, according to Mumbai-based India Bullion and Jewellers Association (IBJA), an industry body. Both prices exclude GST.

In the international market, spot gold inched higher to $1,782.73 per ounce, higher by $1.36 from its previous close, and silver quoted up by 5 cents at $26.27 per ounce.

Palladium was last seen at $2,948.88 per ounce, higher by $22.87 compared with its previous close, after hitting a record high of $2,965.98 per ounce.

What’s fuelling the rally in palladium?

​The most valuable metal

Palladium, a lustrous silvery-white material, is the most valuable of the four major precious metals (gold, silver, platinum and palladium). Up about 19 per cent, so far this year, palladium prices touched an all-time high of $2,941 earlier this week. According to commodity analysts, an acute shortage has driven prices to record highs this year. “Pent-up demand in the auto sector is likely to fuel strong demand for PGM (Platinum Group Metals)-rich catalytic converters amid rising restrictions on emissions,” ANZ analysts wrote in a note.

The US central bank is widely expected to leave policy rates unchanged at the end of its review on Wednesday. But investors will keenly scan Chairman Jerome Powell’s commentary on signs of monetary policy going forward and the likely stance of central bankers to tackle the pandemic that has battered the global economy, say analysts.

“Surge of Covid cases in India is very concerning. The country ordered its armed forces to help tackle the situation as nations pledged urgent medical aid to try to contain an emergency overwhelming the country’s hospitals.,” said Navneet Damani, VP-Commodities Research, Motilal Oswal Financial Services.

He expects a broader range of $1,767-1,792 per ounce on COMEX gold (Rs 47,250-47,750 per 10 grams in domestic rates) in the near term.

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

“Market participants will keep an eye on the U.S. consumer confidence data scheduled later in the day; which if scheduled less than the expectations it could further support metal prices,” said Manoj Kumar Jain, Director-Head of Commodity Research, Prithvi Finmart.

Technical view

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, said Jain, who recommends buying silver around Rs 68,500 for a target of Rs 69,300 with a stop loss at Rs 68,100.

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