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Gold gives a breakout, jumps above Rs 47,000/10 gram on flight to safety; silver climbs Rs 789 a kg

Gold traded higher to a more than one-month peak as US Treasury yields slipped despite better-than- expected US economic data, pushing investors to bullion as a refuge against possible inflation ahead.

Mumbai / April 16, 2021 / 08:05 PM IST

Gold prices rose by Rs 387 to Rs 47,169 per 10 gram in the Mumbai retail market, tracking big gains in the international market overnight and a positive global trend; however, the upside was capped by a sharp rally in the rupee. The yellow metal jumped on safe-haven appeal driven by geopolitical uncertainty, US treasury yields hitting one-month low, weak dollar and rising coronavirus cases globally.

The precious metal gained Rs 723 or 1.56 percent in the domestic market this week.

The rate of 10 gram 22-carat gold in Mumbai was Rs 43,207 plus 3 percent GST, while 24-carat 10 gram was Rs 47,169 plus GST. The 18-carat gold quoted at Rs 35,377 plus GST in the retail market.

The bullion metal which has been consolidating in a broad range gave a breakout above the $1,750 level suggesting bullish momentum in the counter. Inflation concerns are increasing ahead of massive fiscal aids and ultra-cost interest rates across the globe supported the gold prices.

United States imposed sanctions on Russia for alleged inference in the 2020 US Presidential election, cyber-hacking, bullying Ukraine and other “malign” acts.

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The US dollar traded marginally lower at 91.54, or down 0.09 percent against a basket of six rival currencies.

The US 10-year treasury yields traded little changed at 1.55 percent as Fed emphasised keeping interest rate low. The yields have fallen 8.57 percent from the high of 1.70 touched during the week.

Gold holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, was unchanged at 1,022.86, the lowest since April 2020.

Spot gold jumped by $16.74 to $1,780.65 an ounce at 12:18 GMT in London trading.

MCX Bulldesk increased 85 points or 0.58 percent, to 14,862 at 17:49. The index tracks the real-time performance of MCX Gold and MCX Silver futures.

“Gold traded higher to a more than one-month peak as US Treasury yields slipped despite better-than-expected US economic data, pushing investors to bullion as a refuge against possible inflation ahead. Concerns regarding inflation is increasing ahead of massive fiscal aids and ultra-low interest rates across the globe supporting the metal”, said Navneet Damani, Vice President, Motilal Oswal. 

“Gold prices also got a boost after the U.S. government imposed a broad array of sanctions on Russia as punishment for alleged misdeeds, including interfering in the 2020 US election after a positive retail sales and weekly jobless claims market participants will keep an eye on housing data and inflationary expectation from the US scheduled later in the day.” 

The broader range on COMEX could be between $1745- $1778 and on the domestic front, prices could hover in the range of Rs 46,850- Rs 47,450. 

“COMEX gold trades marginally higher near $1769/oz. Gold has benefitted from a decline in the US dollar index and the bond yield on the back of Fed’s dovish monetary policy stance. Gold is also supported by rising virus cases and increased geopolitical tensions. However, upbeat US economic data and continuing ETF outflows weighed on the price. Gold has breached the $1765/oz level indicating positive momentum; however, a daily close above that would confirm the continuation of the upside momentum”, said Ravindra Rao, VP- Head Commodity Research at Kotak Securities.

The gold/silver ratio currently stands at 68.54 to 1, which means the number of silver ounces required to buy one ounce of gold.

Silver prices soared by Rs 789 to Rs 68,810 per kg from its closing on April 15.

In the futures market, the gold rate touched an intraday high of Rs 47,432 and an intraday low of Rs 46,820 on the Multi-Commodity Exchange (MCX). For the June series, the yellow metal touched a low of Rs 44,108 and a high of Rs 51,924.

Gold futures for June delivery gained Rs 183, or 0.39 percent, at Rs 47,358 per 10 gram in evening trade on a business turnover of 11,417 lots. The same for August climbed by Rs 227, or 0.48 percent, to Rs 47,628 on a business turnover of 2,205 lots.

The value of June and August’s contracts traded so far is Rs 2,630.97 crore and Rs 77.61 crore, respectively.

Similarly, Gold Mini contract for May edged higher by Rs 154, or 0.33 percent to Rs 47,035 on a business turnover of 16,458 lots.

Trading Strategy

Tapan Patel, Senior Analyst (Commodities), HDFC Securities

Gold prices rallied, supported by dollar decline and fall in US bond yields. The 10-year US treasury yields fell to 1.54% for the day. Gold prices also got a boost after the US imposed sanctions on Russia which added a geopolitical risk premium to the prices.

We expect gold prices to trade sideways-to-higher for the day with COMEX spot gold support seen at $1,750 and resistance at $1,785. MCX Gold June support lies at Rs 46,600 and resistance is witnessed at Rs 47,200.

Kshitij Purohit, Product Manager, Currency & Commodities, CapitalVia Global Research Limited

International gold is trading in bullish momentum. Prices breached the resistance of $1,750- $1,760 levels and are sustaining above them. On the domestic front, MCX Gold June has been trading near the monthly high of Rs 47,279. We may expect a dip in prices in the upcoming session, which could act as a buying opportunity for the traders.

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Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Sandeep Sinha

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