Domestic gold futures remained under pressure for the most part of the day after giving up initial gains on Tuesday as international spot rates took a breather a day after touching a three-month peak. Sharp losses in equities and weakness in the dollar overseas provided some support.
MCX gold futures for June 4 delivery were last seen trading lower by Rs 166 or 0.35 per cent at Rs 47,785 per 10 grams on Tuesday evening, having fluctuated within a less than Rs 300 range with a negative bias earlier in the day.
The contract struggled between Rs 47,724 and Rs 48,013 during the morning session – which starts from 9:00 am and lasts till 5:00 pm followed by a separate evening session – as against its previous close of Rs 47,951.
The silver contract for delivery on July 5 eked out a gain of Rs 201 or 0.28 per cent to quote at Rs 71,745, after seesawing between Rs 71,276 and Rs 71,783 as against its previous close of Rs 71,544.
The dollar index – which gauges the greenback against six other currencies – weakened as much as 0.14 per cent to 90.060 for the day so far. Weakness in the US dollar makes precious metals more attractive for those holding other currencies.
Comex spot gold gyrated between $1,831.43 and $1,841.61 per ounce as against its previous close of $1,836.15, as was last seen up 0.25 per cent at $1,840.82. It had jumped 3 per cent last week to cross a key psychological level of $1,800 per ounce.
Analysts say speeches by Federal Reserve officials due this week will be watched closely for commentary on the health of the world’s largest eceonomy in its battle against that pandemic.
“Bank of Japan in its meeting yesterday warned of uncertainties over the country’s economic recovery as pandemic curbs hurt service consumption. On other hand, after weak jobs data, US President Biden urged American companies to help workers gain access to vaccines and to raise their pay,” said Navneet Damani, VP-Commodities Research, Motilal Oswal Financial Services.
Back home, spot gold (22 carat) became cheaper by Rs 212 to settle at Rs 47,308 per 10 grams in the national capital for the day. Silver followed suit, declining by Rs 973 to Rs 70,646 per kilogram.
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Dalal Street halted a rally that stretched to four sessions in a row amid a selloff in financial and IT stocks on concerns that a potential acceleration in US inflation could cause foreign fund outflows.
The S&P BSE Sensex index slid 0.69 per cent to end at 49,161.81 and the broader NSE Nifty 50 benchmark fell 0.61 per cent to 14,850.75, having rallied about 3 per cent each in the past four days.
Gains in equities render precious metals less attractive for investors with an improvement in their risk appetite, and vice versa.
Going forward, market participants will keenly monitor domestic data on consumer inflation and industrial production due this week.
“Gold has support at $1,824-1,810 per troy ounce and resistance at $1,850-1,866; silver finds support at $27.20-26.70 per ounce and resistance at $27.84-28.20 per ounce.”
Where is the yellow metal headed?
Damani expects Comex spot gold to move within a range of $1,820-1,855 in the near term, and MCX gold between Rs 47,800 and Rs 48,330 per 10 grams.
Some analysts also say gold appears to be in a broader uptrend from a long-term perspective.
Manoj Kumar Jain, Director-Head of Commodity Research, Prithvi Finmart, expects both precious metals to remain volatile in the near term with the yellow metal seen approaching the $1,850 per ounce mark.
The nearby month contract at MCX has support at Rs 47800-47580 and resistance at Rs 48,055-48,250, said Jain. For silver, support is seen at Rs 71,100-70,400 and resistance at Rs 72,000-72,700 per kg.
He recommends buying MCX gold around Rs 47,800 for a target of Rs 48,200 with a stop loss at Rs 47,580 and going long on silver around Rs 71,000 for a target of Rs 72,500 with a stop loss at Rs 70,200.