Gold prices inch closer to Rs 45,000/10 gm on positive global cues, silver rises by Rs 875 a kg

Gold prices climbed by Rs 729 to Rs 44,919 per 10 gram in the Mumbai retail market, tracking a positive global trend and weakness in the US dollar. The yellow metal recovered on short-covering, bargain hunting in the cash market and US stimulus plan.

The rate of 10 gram 22-carat gold in Mumbai was Rs 41,146 plus 3 percent GST, while 24-carat 10 gram was Rs 44,919 plus GST. The 18-carat gold quoted at Rs 33,689 plus GST in the retail market.

US President Joe Biden unveiled a $2.25 trillion infrastructure plan which could boost the yellow metal’s appeal as a hedge against inflation. Rumours of lockdowns across Europe has taken a toll on the pace of economic recovery which could fuel the upward move.

The US dollar traded mildly lower at 93.19, or down 0.05 percent against a basket of six rival currencies. The dollar index hit 2021 high of 93.47 during intraday in Wednesday’s trade.

The US 10-year treasury yields dipped to 1.71 percent, down 3 basis points as market players assess the US economic outlook in light of the new infrastructure plan.

Gold holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, were unchanged for the second day at 1037.5 tonnes.

Spot gold spurt by $32.06 to $1,717.32 an ounce at 1218 GMT in London trading.

MCX Bulldesk soared 54 points or 0.39 percent, at 14,050 at 17:49. The index tracks the real-time performance of MCX Gold and MCX Silver futures.

Navneet Damani, Vice President, Motilal Oswal said, “Gold prices traded higher, as expectations of a $2 trillion-plus stimulus plan in the U.S. raised concerns of inflation, while reports of a new vaccine-resistant virus strain and restrictive measures announced by few countries in order to control the spread of the virus also supported bullion's safe-haven appeal. US President Biden called for a sweeping use of government power to reshape the world's largest economy and counter China's rise in a $2 trillion-plus proposal that was met with some Republican resistance.” 

“The WTO slightly raised its growth forecast for global goods trade this year but said the outlook was clouded by risks from the rollout of coronavirus vaccines and the possible emergence of vaccine-resistant strains. After a better than expected private payroll data, the market will focus on the non-farm payroll data scheduled tomorrow. Market participants will also focus on the Manufacturing PMI data from major economies.” 

The broader range on COMEX could be between $1700- $1740 and on the domestic front, prices could hover in the range of Rs 44,780- Rs 45,300.

“COMEX gold trades flat near $1715/oz. Weighing on the gold price is US economic optimism, vaccine progress, higher yields and lack of ETF buying. Supporting gold is a retreat in the US dollar index from recent highs, mixed US economic data, rising virus cases and a dovish central bank stance. Gold has bounced back after managing to hold above $1670/oz however a sharp rise is unlikely until US dollar corrects sharply”, said Ravindra Rao, VP- Head Commodity Research at Kotak Securities.

The gold/silver ratio currently stands at 70.47 to 1, which means the number of silver ounces required to buy one ounce of gold.

Silver prices jumped by Rs 875 to Rs 63,737 per kg from its closing on March 31.

In the futures market, the gold rate touched an intraday high of Rs 45,185 and an intraday low of Rs 44,911 on the Multi-Commodity Exchange (MCX). For the June series, the yellow metal touched a low of Rs 44,108 and a high of Rs 51,924.

Gold futures for June delivery gained by Rs 235, or 0.52 percent, at Rs 45,170 per 10 gram in evening trade on a business turnover of 12,247 lots. The same for August soared Rs 156, or 0.34 percent, at Rs 45,390 on a business turnover of 262 lots.

The value of June and August’s contracts traded so far is Rs 1,456.36 crore and Rs 82.16 crore, respectively.

Similarly, Gold Mini contract for May edged higher by Rs 204, or 0.46 percent to Rs 44,965 on a business turnover of 18,089 lots.

Trading Strategy

Tapan Patel, Senior Analyst (Commodities), HDFC Securities

Gold prices witnessed a sharp rebound from the key support levels recovering from the bear territory. Gold prices got support from ease in US bond yields and decline in dollar index after US President unveiled multi trillion-dollar infrastructure investment plan. We expect gold prices to trade sideways to lower for the day on mixed global cues with dollar resuming rally in the morning trade against peer currencies.

We expect gold prices to trade sideways to higher for the day with COMEX spot gold support seen at $1,690 and resistance at $1,740. MCX Gold June support lies at Rs 44,800 and resistance is witnessed at Rs 45,400.

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

International gold is trading with bullish momentum after bouncing from the lows of $1,682 - $1,675 levels. On the upside, $1,720 - $1,725 could prove to be resistance to the prices. MCX June gold has been sustaining above 20-SMA. Prices are trading with bullish momentum since the previous session and have already rallied more than 800 points from the support of Rs 44,000 - Rs 44,200 levels.

We could expect a minor correction to take place in the upcoming session where Rs 44,900 levels could be tested after which bullish momentum may continue.

Prathamesh Mallya, AVP- Research, Non-Agri Commodities and Currencies, Angel Broking Ltd

Rising US treasury yields, strengthening dollar, optimism about growth, increasing pace of vaccinated population are set of factors driving gold prices lower. Those who have missed the rally before can accumulate gold and hold for a longer term for possible price moves higher towards Rs 46,000 per 10 grams from a month perspective.

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