Gold prices declined for the third successive week to settle at Rs 46,000 per 10 gram on better-than-expected retail sales and steady growth in US manufacturing activities. The yellow metal was dragged down by strength in the US dollar index which rose to a one-month high and 10-year US treasury yields jumped to a two-month high.
The precious metal after consolidating in a $50 range since last month gives a breakdown below the crucial support zone of $1,780 and $1,760 indicating bearishness in the price.
The yellow metal fell in three out of five trading sessions on the MCX and ended the week with a loss of Rs 806 or 1.72 percent. Comex gold, on the other hand, tumbled $40.7 or 2.71 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 35.31, which suggests weakness in prices.
“Gold prices traded lower for the second consecutive week on dollar strength and rally in US bond yields. Gold prices traded under pressure following strong US economic data which raised market speculation that US FED may end the bond-buying programme sooner than expected. The better-than-expected retail sales data pushed dollar index and US treasury yields up which dampened demand for safe-haven assets,” said Tapan Patel- Senior Analyst (Commodities), HDFC Securities.
“The traders and investors are eyeing for upcoming US FOMC meeting due next week to get clues on Fed tapering. Gold prices may cap downside with short recovery if US FED keeps mum on taming the asset purchase programme,” he added.
The retail demand is likely to be tepid with the start of a 16-day inauspicious period of Pitru Paksha from September 20, during this time people perform the annual ritual for their ancestors.
The CFTC data showed that money managers increased their net long positions by 3,855 lots in last week.
The number of Americans filing new claims for jobless benefits rose by 20,000 to 332,000 for the week ended September 10 against the expectation of 330,000.
US retail sales increased 0.7 percent in August as against a forecast of 0.8 percent decline aided by online sales, said US Commerce Department.
The spot rupee depreciates by 0.74 percent against the dollar.
The US dollar index climbed 0.33 percent to close at 93.22 against the rival currencies, while 10-year US treasury yields rose to 1.37 percent during the week. The dollar index ended with a gain of 0.68 percent through the week and touched a high of 92.23.
Gold ETF holdings witnessed inflows as holdings at SPDR Gold Shares rose to 1002 tonnes from the previous week’s 998 tonnes.
The spot gold/silver ratio currently stands at 78.35 to 1 indicating that gold has outperformed silver. The Mint ratio is trading at its highest since November 4, 2020.
Silver prices plunged by Rs 3,592, or 5.65 percent to Rs 60,000 per kg this week on the MCX.
Spot gold settled with a mild gain of $1.17 at $1,754.97 an ounce in London trading.
Gold futures for October delivery dropped by Rs 76, or 0.16 percent, to settle at Rs 46,000, with a business turnover of 9,013 lots. The same for the December contract fell by Rs 120, or 0.26 percent, to Rs 46,153 on a business turnover of 7,536 lots.
Recommendation
Patel expects gold prices to trade sideways to down in the coming week with COMEX spot gold resistance at $1,800 per ounce and support at $1,720 per ounce. At MCX, Gold October prices have near term resistance at Rs 46,800 per 10 grams and support at Rs 45,600 per 10 gram.
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