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Gold December contract may continue to trade higher with resistance at Rs 53,500 per 10 gram

The weaker dollar against major currencies boosted buying in commodities.

November 09, 2020 / 09:53 PM IST

Commodity prices regained momentum on US presidential election jitters as most of the non-agro commodities witnessed strong buying during the week passed by. Silver prices rallied the most reporting gains of more than 8 percent for the week followed by Zinc, gold and crude oil. Natural gas prices on the contrary plunged by more than 13 percent during the week. The weaker dollar against major currencies boosted buying in commodities. The greenback fell to 92.23 shedding nearly 2 percent for the week against the major currencies.

Bullion prices rallied on the uncertainty of US presidential elections which has led to public protest in some parts of the US. COMEX spot gold prices gained by nearly 4 percent to $1,951 an ounce crossing a key hurdle at $1940 for the week, reporting the highest weekly run since July 2020. Spot silver prices at COMEX remained highly volatile rallied by more than 8 percent to $25.61 per ounce for the week supported by strong equity indices and positive base metals.

Gold prices pared previous losses recovered from the major support range of $1860 per ounce at the start of the week as fresh lockdown in Europe and US election uncertainty boosted safe-haven buying. Bullion prices gained momentum after polls showed probable victory to Democratic Party candidate Joe Biden which send the dollar index southwards on more stimulus hopes. Joe Biden is set to win the White House race which has raised hopes for economic stimulus and corona aid package. The higher government spending will eventually pressure dollar and will lower the buying cost for precious metals. The US FOMC also kept a loose stance over the urgent need for a relief package as a record surge in virus cases has shaken economic recovery.

The Gold ETF holdings at SPDR gold shares rose to 1,260.20 tonnes from the previous week’s 1,257.67 tonnes. However, the US CFTC data showed that money managers have decreased their net long positions in gold to a 3-week low by 9,658 lots last week while hedge funds decreased their net long position in silver by 326 lots.

Bullion prices are expected to trade higher in the coming week on current global market uncertainty while traders and investors are awaiting clear results from US presidential elections and assessing the political environment after current president Donald Trump's decision to file lawsuit. COMEX spot gold prices have given breakout above near term resistance at $1940 per ounce while prices are heading for next resistance at $1980 per ounce. COMEX spot silver prices may touch $26.80/27.50 range in the near term breaking the range above $25.60 per ounce.

At MCX, the Gold December contract may continue to trade higher with resistance at Rs 52,800/53,500 per 10 gram as rupee appreciation may limit upside compare to gains in COMEX prices with support at Rs 51,400 per 10 grams for the coming week. MCX Silver December may follow strong global cues with support at Rs 62,500 per KG and resistance at Rs 67,000 and Rs 69,500 per KG respectively.

(Tapan Patel, Senior Analyst - Commodities at HDFC Securities.)

Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Tapan Patel is the Senior Analyst - Commodities at HDFC Securities.
first published: Nov 9, 2020 09:53 pm