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Gold futures edge lower, silver holds Rs 71,000/kg-mark: What analysts say

Domestic gold and silver prices registered mild losses on Tuesday amid steadily declining Covid-19 infections in the country, though an easing dollar ahead of key US data limited the downside.

MCX gold futures for June 4 delivery struggled below the flatline for most of the morning session and were last seen quoting down by Rs 25 at Rs 48,528 per 10 grams. The contract moved between Rs 48,333 and Rs 48,590 as against its previous close of Rs 48,553.

MCX silver futures for July 5 delivery followed suit, and were down 0.59 per cent at Rs 71,388 per kilogram, having moved between Rs 71,005 and Rs 71,750 as against their previous close of Rs Rs 71,811.

Optimism on a fast recovery in major economies still battling against the pandemic continued to put pressure on bullion after recent gains, say analysts.

In the international spot market, benchmark gold moved within a $14 range between $1,872.78 and $1,887.23, and were last seen up 0.12 per cent at $1,883.19 per ounce. Silver was down 0.48 per cent to $27.64 per ounce.

Back home, spot gold (22 carat) declined by Rs 102 to settle at Rs 48,025 per 10 grams in the national capital. Silver followed suit, dropping by Rs 269 to Rs 70,810 per kilogram.

Analysts say comments from US central bank officials somewhat dented the appeal of the yellow metal.

“Hopes of a quick economic recovery lifted demand for riskier assets, although a weaker dollar and lower US Treasury yields limited losses for the safe-haven metal. A few Fed officials have affirmed their support to keep monetary policy accommodative for some time,” said Navneet Damani, VP-Commodities Research, Motilal Oswal Financial Services.

Traditionally considered a hedge against inflation, gold loses its allure with increasing higher interest rates as they raise the opportunity cost of holding it.

The rupee appreciated by 19 paise to end at 72.77 against the dollar, amid weakness in the greenback overseas. The dollar index — which measures strength in the greenback against six major peers — quoted down 0.20 per cent at 89.66. A softer dollar makes precious metals more attractive for holders of other currencies.

A weakening dollar and lacklustre trade on Dalal Street kept the losses in bullion in check.

“Gold and silver prices are expected to remain positive this week and the yellow metal could approach $1,900 per troy ounce levels.”

— Manoj Kumar Jain, Prithvi Finmart

Domestic equity benchmarks extended ended a volatile session on a mixed note close to the flatline, as profit booking in financial stocks offset buying interest in auto and IT stocks. The NSE Nifty50 index eked out a gain of 10.75 points to close at 15,208.45, taking its gains to a third straight day, and the leaner S&P BSE Sensex benchmark declined 14.37 points to 50,637.53.

Typically, losses in equities boost the appeal of precious metals, as investors rush to safety.

Technical view

“Gold is trading above its 200-day moving average and inflation concerns continue to support its prices,” said Manoj Kumar Jain, Director-Head of Commodity Research, Prithvi Finmart.

The MCX June contract has support at Rs 48,330-48,180 and resistance at Rs 48,660-48,850, he said, adding that silver is expected to find support at Rs 71,200-70,700 and meet resistance at Rs 72,200-73,000 per kg.

Jain suggests buying MCX gold around Rs 48,330 for a target of Rs 48,700 with a stop loss at Rs 48,050, and silver around Rs 71,200 for a target of Rs 72,500 with a stop loss at Rs 70,500.

Damani expects MCX gold to move between Rs 48,200 and Rs 48,750 per 10 grams in the near term ($1,860-1,900 per ounce on Comex).

Market participants keenly awaited data on consumer confidence in the US due later in the day for cues.

Analysts say a reading exceeding expectations can weigh on precious metal rates. Data on US GDP and joblessness are also slated for release this week.

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