Gold price edges lower to settle at Rs 48,702/10 gm, silver plunges by Rs 1,703 a kg

Patel expects gold prices to trade sideways to down for the short term with COMEX spot gold having resistance near $1,870 per ounce and support at $1,800 per ounce.

Mumbai / January 17, 2021 / 05:54 PM IST

Gold prices slumped to Rs 48,702 per 10 gram on January 15 as participants increased their short position as seen by the open interest. The precious metal ended with a loss of Rs 116 or 0.24 percent for the week.

The yellow metal slipped in three out of five trading sessions on the MCX.

The bullion metal price was pressured by gains in dollar, rising bond yields, strong US Industrial Production, and rising inflation expectations.

In the retail market, the bullion metal closed at Rs 49,327 per 10 gram on Friday, up 0.65 percent on rupee depreciation and a selloff in equity markets but declined Rs 1,094 or 2.17 percent during the week in the domestic market. The premium charged by dealers over official domestic price dropped to $0.5 per troy ounce this week from $1.5 last week as the high price kept customers away.

The rate of 10 gram 22-carat gold in Mumbai was Rs 45,184 plus 3 percent GST, while 24-carat 10 gram was Rs 49,327 plus GST. The 18-carat gold quoted at Rs 36,995 plus GST in the retail market.

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The US and Europe have witnessed a renewed surge in coronavirus cases which has brought fears in the global market that has led to lower buying in gold which is among the riskier assets traded in the global markets.

The CFTC data showed that money managers decreased net long positions by 46,859 lots last week.

The US dollar settled higher at 90.77 or 0.62 percent higher on Friday against a basket of six currencies. The greenback gained 0.79 percent during the week on safe-haven appeal. Stronger US currency made the Dollar-denominated Gold less desirable for other currency holders.

Gold holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell by 4.48 tonne to 1,177.63 tonnes on increased ETF outflow.

MCX Bulldesk tanked 212 points, or 1.38 percent to end at 15,155. The index tracks the real-time performance of MCX Gold and MCX Silver futures.

“Gold prices traded down for another week on strong investors’ appetite for dollar. The rally in the dollar index triggered selling in gold prices on Friday despite a fall in bond yields and weaker equity indices. The traders and investors engaged in the roller coaster ride during the week on mixed global cues. The expectations of more stimulus announcement from the Biden administration and ultra-low interest rates from the US Fed kept most of the downside limited in gold prices during the week. The dollar index rose by 0.75 percent for the week in a rare move against widening deficit and higher stimulus”, said Tapan Patel- Senior Analyst (Commodities), HDFC Securities.

Sunand Subramaniam, Senior Research Associate at Choice Broking said, “Fundamentally for the coming month, we expect international Gold futures to continue to trade bearish as Joe Biden has unveiled a $1.9 trillion coronavirus relief proposal, aimed at urgently combating the pandemic and economic crisis. In addition, US health officials hope new COVID vaccine rules can ease the latest surge after the Trump administration recently rolled out the vaccine does which they kept it as reserves.”

“Gold prices could see correction as ETF investments in gold has slowdown with recoveries in the 10-year bond yields in the US. China’s economic recovery has accelerated in the fourth quarter of 2020 to 6.1 percent after the third quarter’s 4.9 percent expansion, driven by stronger demand at home and abroad and policy stimulus which is expected to provide a solid boost into 2021. Overall, we expect a bearish trend in MCX Gold futures for the month ahead”, Subramaniam noted.

The gold/silver ratio currently stands at 73.84 to 1, which means the number of silver ounces required to buy one ounce of gold. The increase in ratio indicates that gold has outperformed silver.

Silver prices plummeted Rs 1,703 or 2.55 percent to close at Rs 64,980 per kg on the MCX. The precious metal ended the week with a gain of Rs 749 or 1.17 percent in the domestic bourse.

In the futures market, the gold rate touched an intraday high of Rs 49,327 and an intraday low of Rs 48,537 on the Multi-Commodity Exchange (MCX). For the February series, the yellow metal touched a low of Rs 41,560 and a high of Rs 57,100.

Gold futures for February delivery slipped Rs 519, or 1.05 percent, to settle at Rs 48,702 per 10 gram with a business turnover of 7,385 lots. The same for April declined Rs 499, or 1.01 percent, at Rs 48,730 on a business turnover of 8,108 lots.

The value of the February and April contracts traded on January 15 was Rs 5,544.30 crore and Rs 503.04 crore, respectively.

Similarly, Gold Mini contract for February decreased Rs 468, or 0.95 percent to shut at Rs 48,770 on a business turnover of 14,947 lots.

“We expect gold prices to trade sideways to down for short term with COMEX spot gold having resistance near $1,870 per ounce and support at $1,800 per ounce. At MCX, gold February prices have near term resistance at Rs 49,700 per 10 grams and support at Rs 47,900 per 10 gram”, Patel said.

Spot gold settled with a loss of $17.80 at $1,828.49 an ounce losing its shine for the second week of the year in London trading.

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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
first published: Jan 16, 2021 03:42 pm

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