Gold futures ease to Rs 48,300/10 gm, silver near Rs 74,000/kg. Time to take positions?

Domestic gold and silver prices moved on a mixed note on Tuesday despite the yellow metal scaling a four-month peak in the international spot market. Though a third day of appreciation in the rupee amid weakness in the dollar overseas supported the precious metals, handsome gains in equities dented bullion’s safe-haven appeal.

MCX gold futures for June 4 delivery languished in negative territory throughout the day and were last seen quoting down 0.27 per cent (Rs 133) at Rs 48,341 per 10 grams.

The contract weakened as much as 0.38 per cent to Rs 48,290 per 10 grams in the morning session, which is conducted from 9:00 am to 5:00 pm on the bourse, and is followed by a separate evening session that lasts till 11:30 pm.

MCX silver for July 5 delivery was up 0.64 per cent (Rs 466) at Rs 73,790 per kilogram at the time, having risen to as high as Rs 74,099 earlier.

In the international spot market, benchmark Comex gold quoted at $ 1,871.14 per ounce at the time, up $ 4.33 or 0.23 per cent on the day, after touching $ 1,873.51 per ounce earlier during the day — the highest intraday level recorded since January 29.

“(Comex) gold breached the $ 1,850 level as a weaker US dollar and growing inflationary pressure lifted bullion’s appeal as an inflation hedge. Weak economic data readings out of the US last week have sparked concerns over rising inflation and have also increased pressure on the central banks to make changes to interest rates,” said Navneet Damani, VP-Commodities Research, Motilal Oswal Financial Services.

“Weakness in the dollar, strength in the crude oil prices and selling pressure in crypto currencies continue to support precious metals.”

— Manoj Kumar Jain, Prithvi Finmart

Back home, analysts expect some volatility in precious metals in the near term on currency fluctuations, but add that any dip can be used to take fresh positions.

Spot gold (22 carat) became dearer by Rs 333 to settle at Rs 47,833 per 10 grams in the national capital. Silver followed suit, rising by Rs 2,021 to Rs 73,122 per kilogram

The rupee gained by 17 paise to end at 73.05 against the dollar amid weakness in the US currency. The dollar index — which gauges the American currency against six major peers — was last seen trading 0.45 per cent lower at 89.74.

With Tuesday’s rise, the rupee has appreciated a cumulative 0.50 per cent in three consecutive trading sessions.

Dalal Street climbed atop a two-month peak as bulls amid a fifth straight day of decline in daily coronavirus cases in the country. The S&P BSE Sensex index jumped 1.24 per cent to end at 50,193.33 whereas the broader NSE Nifty 50 benchmark clocked a gain of the same magnitude to settle at 15,108.10 — their highest closing levels since March 16 and March 10, respectively.

Typically, gains in equities dent the safe-haven appeal of precious metals.

Daily Covid-19 cases in the country rose by 2,63,533, remaining below the 3,00,000 mark for a second straight day after a gap of nearly a month. However, deaths rose by a record 4,329.

Where is the yellow metal headed?
Damani expects Comex spot gold to move within a range of $ 1,855-1,900, and MCX gold between Rs 48,230 and Rs 48,950 per 10 grams in the near term.

“International gold is trading with a positive bias after breaching the psychological level of $ 1,850. We expect a dip till these levels before it rises again,” said Kshitij Purohit, Lead International Products and Commodities at CapitalVia Global Research.

“On the domestic front, MCX gold (June) opened on a negative note and if it continues to trade lower, levels of Rs 48,200-48,000 may be tested,” he added.

The MCX June contract has support at Rs 48,180-48,055 and resistance at Rs 48,660-48,800, said Manoj Kumar Jain, Director-Head of Commodity Research, Prithvi Finmart. For silver, he sees support at Rs 72,700-72,200 and resistance at Rs 73,900-74,500 per kg.

Jain suggests buying MCX gold around Rs 48,300 for a target of Rs 48,800 with a stop loss at Rs 48,050 and silver around Rs 72,700 for a target of Rs 74,200 with a stop loss at Rs 72,100.

Market participants will monitor minutes of the latest policy review by the US central bank due on Wednesday along with PMI data on manufacturing and services activity from major economies scheduled for later this week.