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Gold steady near Rs 46,900/10 gm, silver dips below Rs 69,400/kg: Time to take positions?

Gold steady near Rs 46,900/10 gm, silver dips below Rs 69,400/kg: Time to take positions?

05 May 2021

Domestic gold prices held steady near Rs 46,900 per 10 grams on Wednesday as a rising dollar made the yellow metal less appealing for holders of other currencies.

MCX gold futures for June 4 delivery traded nearly unchanged at Rs 46,879 per 10 grams at the last count, down by Rs 8 on the day, having moved on either side of flatline for the most part of the day after giving up initial gains to as high as Rs 47,046.

The August 5 contract quoted at Rs 47,156, down by Rs 41 or 0.09 per cent at the time.

Silver, which had also begun the day on a stronger note, followed suit, trading Rs 274 or 0.39 per cent lower at Rs 69,375.

With that, both precious metals weakened for the second straight day.

Globally, spot gold quoted 0.82 per cent lower at $1,778.22 per ounce and silver was down 0.57 per cent at $26.33 per ounce.

US Treasury Secretary Janet Yellen said interest rates may have to rise modestly to prevent the US economy from overheating due to higher levels of government spending, without specifying a timeframe. Though later, she said she was neither predicting nor recommending policy rate increases, downplaying earlier comments.

The dollar index – which gauges strength in the greenback against six peers overseas – rose 0.32 per cent to 91.245, after strengthening to as high as 91.44 earlier on Wednesday.

Higher interest rates affect gold’s appeal as a safe-haven bet.

Back home, the rupee ended 0.16 per cent lower at 73.87 against the dollar. Some analysts say the rupee may move sideways for the time being, putting pressure on precious metal rates.

“The numbers of Covid-19 cases are still around at 4 lakh per day and rising crude oil prices could restrict further gains in the rupee,” said Manoj Kumar Jain, Director-Head of Commodity Research, Prithvi Finmart.

Spot gold and silver of 99.9 per cent purity stood at Rs 46,753 per 10 grams and Rs 68,835 per kiogram, excluding GST, according to Mumbai-based industry body IBJA.

On Dalal Street, financial and healthcare stocks pushed equities higher after the RBI announced measures to help the sectors tide over the second wave of Covid infections wave in the country.

The benchmark S&P BSE Sensex gained 0.88 per cent to end at 48,677.55 and the broader NSE Nifty 50 benchmark rose 0.84 per cent to 14,617.85.

Typically, precious metal rates share an inverse relationship with equities.

What analysts say

“The US trade deficit jumped to a record high in March amid roaring domestic demand, which is drawing in imports, hence supporting the metal prices,” said Navneet Damani, VP-Commodities Research, Motilal Oswal Financial Services.

He expects gold on COMEX to move in a broader range of $1,765-1,810 per ounce and on MCX at Rs 46,750-47,320 per 10 grams in the near term. Damani sees MCX gold touching the Rs 50,500 mark by Diwali.

Technical outlook

“MCX gold finds support at Rs 46,600-46,380 and resistance at Rs 47,055-47,300, and silver at Rs 69,100-68,500 and Rs 70,400-71,000, respectively,” said Jain, who suggests buying the yellow metal around Rs 46,700 for a target of Rs 47,100 with a stop loss at Rs 46,440.

Markets participants will closely track data on services activity from major economies due this week.