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Gold prices fall for third day on sharp rally in rupee; silver corrects by Rs 292/kg

According to Kotak Securities' Ravindra Rao, gold may continue to trade firm amid risk aversion in the market and a fall may come only if Fed Chairman sounds too hawkish.

Mumbai / August 27, 2021 / 06:44 PM IST

Gold prices dropped for the third straight day by 201 to Rs 47,149 per 10 gram in the Mumbai retail market on sharp appreciation in the rupee. The yellow metal traded in a narrow band in the international market as investors await Fed chief Powell’s speech later in the day for further direction.

The bullion metal shed Rs 232, or 0.49 percent this week in the domestic market.

The price of 10 gram, 22-carat gold in Mumbai was Rs 43,188 plus 3 percent GST, while 24-carat 10 gram stood at Rs 47,149 plus GST. The 18-carat gold is quoted at Rs 35,362 plus GST in the retail market.

Dallas Federal President Robert Kaplan remained confident about the US economy and asserted that the central bank should start tapering in October 21.

Markets will closely watch FED Chair Jerome Powell’s speech scheduled later in the evening for cues on their stance in the coming months. There is also a remote possibility that the Fed chair may not announce anything in his speech on Friday and could make an announcement at the September meeting after the August non-farm payroll number is released in the first week of September.

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Gold holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund remained unchanged at 1,001.72 tonnes. The ETF has a market value of $57.52 billion.

The US dollar index inched slightly lower to 93.01, down 0.07 percent against a basket of six rival currencies.

Spot gold marginally rose by $3.66 to $1,796.07 an ounce at 1155 GMT in London trading.

MCX Bulldesk decreased by 32 points or 0.23 percent at 14,134 at 17:27. The index tracks the real-time performance of MCX Gold and MCX Silver futures.

“Gold prices traded steadied around the $1,800 level amidst the rise in Delta variant cases, updates on the Kabul airport bomb blasts. Although on the other hand, comments from Fed officials in support of the tapering plans weighed on the metal prices. A cautious approach is advised as all eyes are on Governor Powell’s speech later in the day at the Jackson Hole symposium after some US central bank officials called for paring bond purchases," said Navneet Damani, VP – Commodities Research at Motilal Oswal Financial Services. 

“On the data front, marginal rise in weekly jobless claims data was witnessed supporting the prices; whereas preliminary U.S. GDP data showed the second estimate of growth was 6.6%, up from the preliminary estimates of 6.5%. Today, along with Governor Powell's speech, the focus will also be on the US Core PCE data,” Damani said.

The Broader range on COMEX could be between $1,782-1,825 and on the domestic front, prices could hover in the range of Rs 47,230- 47,750. 

“COMEX gold trades range-bound near $1798/oz. Gold is supported by safe-haven buying amid increasing tensions relating to Afghanistan. Mixed economic data from major economies and rising virus cases have also lent support. However, weighing on the gold price is a recovery in the US dollar amid some hawkish Fed comments, weaker investor interest and a drop in China’s gold imports. Gold may continue to trade firm amid risk aversion in the market and a fall may come only if Fed Chairman sounds too hawkish,” said Ravindra Rao, CMT, EPAT, VP- Head Commodity Research at Kotak Securities.

The gold-silver ratio currently stands at 74.91 to 1, which means 74.91 ounces of silver is required to buy an ounce of gold.

Silver prices fell by Rs 292 to Rs 62,938 per kg against its closing price on August 26.

In the futures market, the gold rate touched an intraday high of Rs 47,572 and an intraday low of Rs 46,937 on the Multi-Commodity Exchange (MCX). For the October series, the yellow metal touched a low of Rs 45,662 and a high of Rs 50,040. 

Gold futures for October delivery slipped by Rs 149, or 0.32 percent, to Rs 47,088 per 10 gram in evening trade on a business turnover of 11,679 lots. The same for December fell Rs 165, or 0.35 percent, to Rs 47,242 on a business turnover of 2,981 lots.

The value of October and December’s contracts traded so far is Rs 2,337.04 crore and Rs 158.01 crore, respectively.

Similarly, Gold Mini contract for September slides Rs 160, or 0.34 percent at Rs 47,003 on a business turnover of 5,664 lots.

Trading Strategy

Tapan Patel- Senior Analyst (Commodities), HDFC Securities

Gold prices traded volatile ahead of FED chairman speech at Jackson Hole Symposium on Friday. The dollar index traded under pressure with the market discounting the hawkish stance from US FED. The slower economic recovery and surge in virus cases may support bullion prices to trade firm for the day. 

We expect gold prices to trade sideways to up with COMEX spot gold resistance at $1810 and support at $1780 per ounce. MCX Gold October support lies at Rs 46,900 and resistance at Rs 47,600 per 10 gram.

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