Gold prices declined Rs 387 to Rs 45,851 per 10 gram in the Mumbai bullion market on stronger dollar, subdued global cues but the downside was capped by rupee weakness. The yellow metal traded in a tight range on prospects that the U.S. Federal Reserve could soon begin winding down the bond-purchase program.
For the September month, the bullion fell Rs 1,627 or 3.43 percent in the domestic market.
The price of 10 gram, 22-carat gold in Mumbai was Rs 42,000 plus 3 percent GST, while 24-carat 10 gram stood at Rs 45,851 plus GST. The 18-carat gold is quoted at Rs 34,388 plus GST in the retail market.
Federal Reserve Governor Powell showed concern about the rising inflation, he said that supply constraints thwarting global economic growth could still get worse, keeping inflation elevated longer.
St Louis Federal Reserve President James Bullard said the Fed is a little more aggressive would best ensure longer expansion.
Amidst factors, a strong outflow is also being witnessed in the silver and gold ETF as well as CFTC contracts weighing on the sentiment.
Market participants will keep an eye on the Manufacturing PMI data expected from major economies.
The rupee slipped for the fifth straight session to settle at 74.23 against the US dollar.
Gold holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund remained unchanged at 990.03 tonnes. The ETF has a market value of $55.27 billion.
The US dollar index trade modestly higher at 94.41, up 0.07 percent against a basket of six rival currencies. The rise in the greenback makes bullion expensive for other currency holders.
Spot gold was steady at $1,726.83 an ounce at 1220 GMT in London trading.
MCX Bulldesk rose by 14 points or 0.10 percent at 13,555 at 17:51. The index tracks the real-time performance of MCX Gold and MCX Silver futures.
“Gold prices continue to inch lower hovering near a seven-week low, constrained by a strong dollar, U.S. yields amidst expectations of the U.S. Federal Reserve winding down stimulus measures soon. U.S. yields were trading above 1.5 whereas; Dollar index surged to a one year high. Fed officials and Governor continue to reiterate yesterday that the U.S. central bank will be able to begin reducing asset purchases by the year-end, but believed an interest rate hike is still a “long way” away,” said Navneet Damani, VP – Commodities Research at Motilal Oswal Financial Services.
The broader range on COMEX could be between $1700- 1750 and on the domestic front, prices could hover in the range of Rs 45,700-46,235.
The gold-silver ratio currently stands at 78.89 to 1, which means 78.89 ounces of silver is required to buy an ounce of gold.
Silver prices tumbled by Rs 1,734 to Rs 58,118 per kg against its closing price on September 29.
In the futures market, the gold rate touched an intraday high of Rs 45,824 and an intraday low of Rs 45,479 on the Multi-Commodity Exchange (MCX). For the October series, the yellow metal touched a low of Rs 45,479 and a high of Rs 50,040.
Gold futures for October delivery gained Rs 60, or 0.13 percent, to Rs 45,645 per 10 gram in evening trade on a business turnover of 350 lots. The same for December climbed by Rs 58, or 0.13 percent, to Rs 45,827 on a business turnover of 14,310 lots.
The value of October and December’s contracts traded so far is Rs 35.64 crore and Rs 1,238.19 crore, respectively.
Similarly, the Gold Mini contract for November jumped Rs 74, or 0.16 percent at Rs 45,814 on a business turnover of 19,111 lots.
Trading Strategy
Tapan Patel- Senior Analyst (Commodities), HDFC Securities
Gold prices have kept a lower trading range hovering near $1730 per ounce on US FED tapering expectations. The softer dollar has capped downside on Thursday while broad market cues may continue to weigh on prices on increased expectations of Fed policy change. Earlier, Gold prices traded under pressure with the dollar rallying to 11 months high lowering demand for precious metals.
We expect gold prices to trade sideways to down with COMEX spot gold resistance at $1752 and support at $1,720 per ounce. MCX Gold December support lies at Rs 45,600 and resistance at Rs 46,100 per 10 gram.
Axis Securities advised its clients to buy December Gold at Rs 46,000 with a stop loss at Rs 45,800 and a target of Rs 46,200.
Sriram Iyer, Senior Research Analyst at Reliance Securities said, “Technically if LBMA Gold continues to remain below $1,735 the markets could continue its downside momentum up to the support zones near $1,720-$1,700 levels. Resistance is at $1,743-$1,756 levels.
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