Gold prices ended flat last week to settle at Rs 45,995 per 10 gram as Federal Reserve hinted at early tapering. Further, weak retail demand, and rupee depreciation, too, impacted the price. The yellow metal was weighed down by a surge in 10-year US treasury yields to three months high and strength in the dollar index.
The precious metal traded in a band of $25 last week and failed to cross the $1,780/oz resistance and closed below the $1,760 support level and touched a high and low of $1,774.51 and $1,737.84, respectively during the week.
The yellow metal rose in three out of five trading sessions on the MCX and ended the week with a mild loss of Rs 5 or 0.01 percent. Comex gold, on the other hand, modestly declined $3.8 or 0.22 percent during the week.
The bullion metal has been trading lower than its 5, 20, 50, 100, and 200 days’ simple moving averages and exponential moving averages on the daily chart. The momentum indicator Relative Strength Index (RSI) is at 38.44, which suggests bearishness in the prices.
“Gold prices remained fluctuated near $1750 reporting a third weekly decline in a row on Fed tapering jitters. Gold prices traded higher at the start of the week on China’s property market debt crisis which raised concerns over economic recovery. Gold prices traded under pressure paring gains with a rally in US bond yields post US FOMC meeting,” said Tapan Patel- Senior Analyst (Commodities), HDFC Securities.
“The US FED signalled to unwind pandemic stimulus by mid-2022 and to raise key interest rates by end of 2022. However, US Fed chairman reiterated inflation worries as inflation was trending above the Fed’s target of 2% per annum,” Patel noted.
N S Ramaswamy, Head of Commodities, Ventura Securities said, “After hovering near the 100 EMA level for multiple trading sessions, MCX GOLD prices have finally broken below the key support levels on the daily chart. We may expect prices heading towards Rs 45,000 level in coming sessions.”
He advised his clients to sell MCX GOLD DEC in the range of Rs 46,100-Rs 46,300 for the target of Rs 45,000 - Rs 44,500 with a stop loss above Rs 47,300.
The retail gold demand has been tepid due to the ongoing Shradh (Pitru Paksha) period as buyer postponed their jewellery purchase.
The CFTC data showed that money managers decreased their net long positions by 25,801 lots in last week.
The number of Americans filing new claims for jobless benefits rose for the second week by 16,000 to 351,000 for the week ended September 17 against the expectation of 320,000.
The spot rupee ended 0.26 percent lower against the dollar for the week.
The US dollar index increased 0.14 percent to close at 93.33 against the rival currencies, while 10-year US treasury yields rose to 1.45 percent during the week. The dollar index ended with a gain of 0.17 percent through the week and touched a high of 92.53.
Gold ETF holdings witnessed outflows as holdings at SPDR Gold Shares declined to 993 tonnes from the previous week’s 1002 tonnes.
The spot gold/silver ratio currently stands at 78.05 to 1 indicating that silver has outperformed gold.
Silver prices fell by Rs 72, or 0.12 percent to Rs 59,920 per kg this week on the MCX.
Spot gold settled with a mild loss of $3.80 at $1,750.36 an ounce in London trading.
Gold futures for October delivery slipped by Rs 61, or 0.13 percent, to settle at Rs 45,995, with a business turnover of 5,453 lots. The same for the December contract eased by Rs 119, or 0.26 percent, to Rs 46,058 on a business turnover of 10,270 lots.
Recommendation
Patel expects gold prices to trade sideways to down in the coming week with COMEX spot gold resistance at $1790 per ounce and support at $1680 per ounce. At MCX, Gold October prices have near-term resistance at Rs 46,600 per 10 grams and support at Rs 45,500 per 10 gram.
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