Gold prices fall below Rs 47,000/10 gram on improved economic data; what should investors do now?

Gold prices fell sharply to Rs 46,788 per 10 gram on February 4 on better-than-expected US economic data and a decline in US jobless claims. The yellow metal breached below the psychological level of $1,800/oz on rising bond yields and a stronger dollar.

US Labour Department reported that the number of Americans filing jobless claims dropped for the third successive week to 779,000 last week from 812,000.

The Commerce Department said that December factory orders rose 1.1 percent from 1.3 percent gain in November.

The US dollar traded higher at 91.48, or 0.43 percent against a basket of six currencies, the highest level since November 30.

Sunilkumar Katke, Head - Commodity and Currency, Axis Securities said “Gold has short term support at $1,775-1,750 on the downside while $1,800-1,810 will act as a key resistance. On the MCX, he said gold has support at Rs 45,800-45,500 on the lower end.”

Katke added, “Investors and traders who were sitting on the fence or waiting for correction – the current decline is a good entry point to accumulate. Anything below $1,800-$1,750 will be a decent entry point for positional buyers with a 3-6 months view and on MCX price may touch Rs 52,000 per 10 gram.”

The spot gold/silver ratio currently stands at 68.39 to 1 indicating that silver has outperformed gold.

In the futures market, the gold rate touched an intraday high of Rs 47,673 and an intraday low of Rs 46,611 on the Multi-Commodity Exchange (MCX). For the April series, the yellow metal touched a low of Rs 46,611 and a high of Rs 51,931.

Gold futures for April delivery plunged by Rs 1,124, or 2.35 percent, at Rs 46,692 per 10 gram in evening trade on a business turnover of 14,734 lots. The same for June slipped Rs 1,028, or 2.15 percent, at Rs 46,879 on a business turnover of 709 lots.

The value of the April and June contracts traded so far is Rs 6,194.29 crore and Rs 127.77 crore, respectively.

Similarly, Gold Mini contract for March edged lower by Rs 1,062, or 2.22 percent at Rs 46,680 on a business turnover of 22,487 lots.

Silver delivery for the March contract eased Rs 1,651, or 2.41 percent to Rs 66,914 per kg at 21:55 hours with a business turnover of 12,993 lots. The same for the May contract decreased Rs 1,662, or 2.39 percent, to Rs 67,960 per kg with a turnover of 1,346 lots.

The value of the March and May contracts traded so far is Rs 4,337.56 crore and Rs 114.02 crore, respectively.

In the domestic market, gold price settled at Rs 47,452 per 10 gram, down Rs 524. While silver ended at Rs 67,015 per kg down Rs 481.

At 1627 (GMT), the spot gold was down $45.74 to $1,788.45 an ounce and spot silver dropped $0.75 to $26.14 an ounce in London trading.