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Gold prices decline to Rs 48,126/10 gm on stronger dollar, ETF outflow; silver tanks Rs 1,122 a kg

Gold may remain choppy however volatility in financial markets may keep prices supported.

Mumbai / July 19, 2021 / 06:36 PM IST

Gold prices dropped for the second day by Rs 147 to Rs 48,126 per 10 gram in the Mumbai retail market on weak global cues and broad selloff across assets class, however, the downside was capped by a sharp fall in rupee. The yellow metal declined below the psychological level of $1,800/oz as investors took refuge in the US dollar as a safe-haven on surging inflation and rising coronavirus cases.

The price of 10 gram, 22-carat gold in Mumbai was Rs 44,083 plus 3 percent GST, while 24-carat 10 gram stood at Rs 48,126 plus GST. The 18-carat gold is quoted at Rs 36,095 plus GST in the retail market.

The economic calendar is fairly light this week, although market participants will focus on the preliminary Manufacturing and Services PMI data expected from major economies scheduled later this week.

According to US CFTC data, speculators raised net long positions in gold futures and options positions by 9,986 contracts to 102,989 contracts.

The US dollar trades above 93 marks at 93.02, up 0.36 percent against a basket of six rival currencies, the highest level since November. The jump in the dollar index makes gold expensive for holders of other currencies.

Gold holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund fell by 5.82 tonnes to 1,028.55 tonnes. The ETF has a market value of $60.31 billion.

Spot gold fell by $13.93 to $1,798.26 an ounce at 1216 GMT in London trading.

MCX Bulldesk decreased by 88 points or 0.60 percent, at 14,630 at 17:49. The index tracks the real-time performance of MCX Gold and MCX Silver futures.

“Gold traded fell to the lowest in nearly one week, amidst a rise in U.S. dollar. Gold prices were on their way to mark the fourth weekly gain, although positive U.S. economic data lead to the profit booking that we witnessed last week. On other hand, many countries, especially in Asia, are struggling to curb the highly contagious Delta variant of the coronavirus and have been forced into taking lockdown measures,” said Navneet Damani, VP – Commodities Research at Motilal Oswal Financial Services.

The broader range on COMEX could be between $1792- 1832 and on the domestic front, prices could hover in the range of Rs 48,150- 47,790.

“COMEX gold continues to trade below $1800/oz. Gold is choppy as support from safe haven buying amid rising virus cases and uneven recovery and rising inflation concerns is countered by firmness in the US dollar and weaker investor interest and sluggish consumer demand. Gold may remain choppy however volatility in financial markets may keep prices supported,” said Ravindra Rao, CMT, EPAT-Quantinsti, Head - Commodity Research at Kotak Securities Ltd.

The gold/silver ratio currently stands at 70.99 to 1, which means 70.99 ounces of silver is required to buy an ounce of gold.

Silver prices slumped by Rs 1,122 to Rs 67,790 per kg against its closing price on July 16.

In the futures market, the gold rate touched an intraday high of Rs 48,170 and an intraday low of Rs 47,817 on the Multi-Commodity Exchange (MCX). For the August series, the yellow metal touched a low of Rs 44,501 and a high of Rs 49,721.

Gold futures for August delivery slipped Rs 191, or 0.40 percent, to Rs 47,862 per 10 gram in evening trade on a business turnover of 6,540 lots. The same for October eased Rs 132, or 0.27 percent, to Rs 48,153 on a business turnover of 8,002 lots.

The value of August and October’s contracts traded so far is Rs 2,227.87 crore and Rs 269.17 crore, respectively.

Similarly, Gold Mini contract for August tanked Rs 196, or 0.41 percent at Rs 47,844 on a business turnover of 13,113 lots.

Trading Strategy

Tapan Patel- Senior Analyst (Commodities), HDFC Securities

We expect gold prices to trade sideways to down for the day with COMEX gold support at $1795 and resistance at $1820 per ounce. MCX Gold August support lies at Rs. 47600 and resistance at Rs.48200 per 10 gram.

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

Technically, International Gold is trading with bearish momentum below $1,800 levels after prices were unable to sustain at a higher level and declined more than 15 points. On the domestic front, we may expect the market to continue to trade with bearish momentum and test Rs 47,700-47,600 levels during the evening hours.

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Sandeep Sinha