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Gold prices drop marginally to Rs 46,838/10 gm on firm rupee; silver declines Rs 504/kg

The broader range on COMEX could be between $1,795- 1,825, and on the domestic front, prices could hover in the range of Rs 46,550- 47,100.

Mumbai / February 24, 2021 / 06:14 PM IST

Gold prices fell marginally by Rs 79 to Rs 46,838 per 10 gram in the Mumbai retail market on rupee appreciation and subdued global cues.

The precious metal traded in a narrow band tracking choppiness in the US dollar and Fed Chairman Jerome Powell's statement that the economy needs further support.

The rate of 10 gram 22-carat gold in Mumbai was Rs 42,904 plus 3 percent GST, while 24-carat 10 gram was Rs 46,838 plus GST. The 18-carat gold quoted at Rs 35,129 plus GST in the retail market.

“While the rationalisation of import duty on gold is a step in the right direction, we hope this is the first of a series of such cuts. Tax cuts soften price increase, but are not necessarily a big driver of demand unless the cut is steep or is accompanied by a sharp drop in domestic prices due to other factors. In the case of this year’s Union Budget announcement, the net reduction in duty of 2.19% juxtaposed with a 42% rise in gold prices since July 2019, when duty was last raised, cannot, on its own, be a strong enough trigger for demand," said Somasundaram PR, Managing Director, India, World Gold Council. 

“Our econometric analysis suggests that the impact of this approximate 2.2% net reduction in the duty may result in an increase of slightly less than 7 ton per year in the long-term consumer demand, everything else remaining constant. Every such cut in duty will weaken the grey market and promote transparency in official inflows. However, following a disruptive year when unemployment and loss of livelihoods have been a reality, the support eco-system around tax avoidance is likely to be stronger even at the current level of tax (post-cut) at 14.07% on gold," he added.

The US 10-year bond yield jumped 0.23 percent to 1.36 percent. While the US dollar trades firm at 90.08, or 0.09 percent, against a basket of six currencies.

Gold holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund fell by 5 tonnes to 1,110.44 tonnes.

Spot gold was marginally higher by $2.78 to $1,808.64 an ounce at 1159 GMT in London trading.

MCX Bulldesk was slightly up by 8 points, or 0.05 percent, at 14,914 at 17:30. The index tracks the real-time performance of MCX Gold and MCX Silver futures.

Navneet Damani, Vice-President, Motilal Oswal, said, “Gold prices inched higher as Fed Governor Powell said the central bank would keep monetary policy accommodative as the US economy still needed support. Powell in his testimony pushed back on suggestions that loose monetary policy risked unleashing inflation and financial risks in what may be an emerging economic boom. The benchmark 10-year US Treasury yield fell after Powell's comments, supporting the precious metal pack. On other hand, COVID-19 vaccine makers told Congress that US supplies should surge in the coming weeks due to manufacturing expansions and new vaccine authorisation, capping some gains for the metal.” 

The broader range on COMEX could be between $1,795- 1,825 and on the domestic front, prices could hover in the range of Rs 46,550- 47,100.  

“COMEX gold trades marginally flat near $1805/oz. Supporting gold price is the Fed’s support for loose monetary policy stance and retreat in US bond yields from recent highs. However, weighing on price is continuing ETF outflows, some better than expected US economic data and improving virus situation. Gold is holding above $1800/oz and the Fed's loose monetary policy stance may support price, however, a sharp rise is unlikely until US bond yields correct sharply," said Ravindra Rao, VP- Head Commodity Research at Kotak Securities.

The gold/silver ratio currently stands at 67.65 to 1, which means the number of silver ounces required to buy one ounce of gold.

Silver prices dropped Rs 504 to Rs 69,226 per kg from its closing on February 23. 

In the futures market, the gold rate touched an intraday high of Rs 46,875 and an intraday low of Rs 46,666 on the Multi-Commodity Exchange (MCX). For the April series, the yellow metal touched a low of Rs 45,861 and a high of Rs 51,931.

Gold futures for April delivery slipped Rs 31, or 0.07 percent, at Rs 46,771 per 10 gram in evening trade on a business turnover of 13,039 lots. The same for June gained Rs 15, or 0.03 percent, at Rs 46,955 on a business turnover of 2,628 lots.

The value of the April and June’s contracts traded so far is Rs 2,053.38 crore and Rs 49.72 crore, respectively.

Similarly, Gold Mini contract for March slides Rs 16, or 0.03 percent at Rs 46,616 on a business turnover of 13,628 lots.

Trading Strategy

Tapan Patel, Senior Analyst (Commodities), HDFC Securities

Gold prices traded under pressure with a rise in US bond yields despite the dovish stance from the US FED chairman. Jerome Powell signalled accommodative policy for next couple of years to support economic recovery.

We expect gold prices to trade sideways to up with COMEX spot gold support lies at $1790 and resistance at $1820. MCX Gold April support lies at Rs. 46400 and resistance lies at Rs. 46900.

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

International Gold is trading with marginal negative bias after testing the resistance level of $1,812-1,817. We may expect bears to dominate the evening session and breach $1,800 levels. MCX April gold has been trading in a marginal sideways and negative trend. Bearish momentum is likely to persist above Rs 47,000 levels whereas support is at Rs 46,600-46,400 levels.

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Sandeep Sinha
first published: Feb 24, 2021 06:14 pm