Gold prices edged higher to Rs 47,350 per 10 gram on April 16 as participants increased their long position as seen by the open interest. The precious metal was supported by safe-haven billing driven by geopolitical uncertainty, US treasury yields hit a one-month low, weak dollar and rising coronavirus cases globally.
The yellow metal rose in three out of five trading sessions on the MCX and ended the week with a gain of Rs 760, or 1.63 percent, while the stronger rupee kept upside limited. COMEX gold, on the other hand, climbed $35.7 or 2.05 percent during the same period.
The bullion metal has been trading higher than 5, 20 and 50 days' moving averages but lower than the 100 and 200 days' moving averages on the daily chart. The momentum indicator Relative Strength Index (RSI) is at 65.54, indicating upbeat movement in prices.
Both gold and silver prices are on their way for second consecutive weekly gains. Again, like last week, the movement of the US Dollar and benchmark Treasury yields influenced prices.
The CFTC data showed that money managers decreased their net long positions by 12,640 lots in the last week.
Also, US President Joe Biden signed an executive order imposing new sanctions on Russia. Amid increased tension with China, it seems that Taiwan is once again a major concern to the current administration.
Sriram Iyer, Senior Research Analyst at Reliance Securities said, “The benchmark yields registered their biggest one-day decline in the week since early November and the fall came despite strong retail sales reports and upbeat labour market data. The falling yields also weighed on the dollar which also lifted sentiments for bullion. However, one of the major reasons why gold and silver might have moved higher was the Fed chairman statement this week.”
“Fed Chairman Jerome Powell said that the US Federal Reserve would not be in a hurry to remove their support despite the US economy appearing to have turned a corner towards faster growth amid widening vaccinations against Covid-19. Finally, gold gave a breakout of the consolidation levels amid geopolitical tensions between the United States and China as well as Russia,” Iyer added.
“Gold prices witnessed strong rally reporting the best week in the last four months as traders and investors bet against higher inflation worries. The yellow metal got a boost from dollar decline and fall in US bond yields over FED comments. The US FED reiterated to keep ultra-low interest rates in recent meetings. The dollar index fell below 92 marks losing 0.66% while US 10 year treasury yields retreated to 1.58% from the 14 months high of 1.77% of the week,” said Tapan Patel, Senior Analyst (Commodities), HDFC Securities.
“Gold prices traded higher on rising geopolitical tensions after the US imposed sanctions on Russia. The rising virus cases in Europe and partial lockdown measures in India and Brazil also supported gold prices to trade higher during the week,” Patel noted.
Patel expects gold prices to trade sideways to up in the coming week as prices are witnessing strong resistance near $1,785. The break above $1,785 may lead prices towards $1,820 with support at $1,740 per ounce. At MCX, Gold June prices have near term resistance at Rs 48,000 per 10 grams and support at Rs 46,800 per 10 gram.
In the retail market, the bullion metal closed at Rs 47,169 per 10 gram on Friday, up by 0.83 per cent, tracking a positive global trend. The yellow metal rose by Rs 723 or 1.56 percent during the week in the domestic market.
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 US dollar index shut marginally weaker at 91.53, down 0.10 percent on April 16 against a basket of six rival currencies. The dollar index ended with a loss of 0.67 percent during the week.
The spot gold/silver ratio currently stands at 68.43 to 1 indicating that gold has outperformed silver.
Gold ETF holdings continued outflow as holdings at SPDR Gold Shares fell to 1,020 tonnes during the week down from the previous week’s 1,033 tonnes.
MCX Bulldesk increased 73 points or 0.49 percent to close at 14,850. The index tracks the real-time performance of MCX Gold and MCX Silver futures.
Spot gold settled with a gain of $12.46 at $1,776.37 an ounce in London trading. The yellow metal had risen $33.21 or 1.91 percent last week.
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 soared by Rs 175, or 0.37 percent, to settle at Rs 47,350 per 10 gram with a business turnover of 11,363 lots. The same for August jumped by Rs 189, or 0.40 percent, to Rs 47,590 on a business turnover of 2,295 lots.
The value of June and August’s contracts traded on April 9 was Rs 3,883.56 crore and Rs 150.36 crore, respectively.
Similarly, Gold Mini contract for May edged higher by Rs 144, or 0.31 percent at Rs 47,025 on a business turnover of 15,806 lots.
Next Week Outlook
While several geopolitical events have the potential to escalate and foreign affairs issues could create knee-jerk reactions in gold; however, the move traditionally may not be sustainable.
The major driver of gold so far this year was hardening of bond yields and the U.S. dollar due to growing expectations that the U.S. economy will see a strong economic recovery from the COVID-19 pandemic.
Iyer expects that this will remain the dominant factor driving gold prices throughout the year. At the same time, we remain bullish on gold as we expect interest rates to remain low even as the global economy recovers. So, we expect the prices to remain on the bullish side of things in the coming week as well.
Technicals
LBMA Gold Spot on the weekly chart has given a breakout of its range-bound movement of $1,710-$1,750 levels indicating a bullish reversal in the counter. Resistance is at $1,800-$1,833 levels. Support is at $1,750-$1,720 levels.
Domestically, MCX Gold June is trading above 21 as well as 50 Daily Moving Averages above Rs 46,900 levels indicating strong upside momentum where support is at Rs 46,700-46,400 levels. Resistance is at Rs 47,700-48,200 levels, said Iyer.
Reliance Securities advises its clients to buy on dips for June Gold near Rs 47,000 with a stop loss of Rs 46,700 and a target of Rs 47,800.
Kshitij Purohit, Product Manager, Currency & Commodities, CapitalVia Global Research Limited said, “Short-term momentum turned positive as the fast stochastic generated a crossover buy signal. 10-day SMA crossover 50-day SMA and sustained for 3 consecutive days which means that a short-medium term trend is looking positive.”
He said that the trader should play on the long side and buy a position near Rs 47,050 level for the coming week keeping a stop loss at Rs 46,800 and for the target of Rs 47,800.
Events to watch out
European Union current account – April 19
China interest rate decision – April 20
ECB interest rate decision – April 22
UK Retail sales – April 23
US Services PMI – April 23
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