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Gold prices surge over 20% for second year in a row to settle above Rs 50,000 per 10 gram

Gold prices have kept range bound trading during the week on lack of important economic data and mixed global cues.

Mumbai / December 31, 2020 / 07:03 PM IST

Gold prices soared by Rs 231 to Rs 50,202 per 10 gram in the Mumbai retail market on a softer dollar and positive global cues. The precious metal surged 27.94 percent in the domestic market this year - the best in a decade - after gaining 23.75 percent last year.

The yellow metal price was Rs 39,240/10 gm on December 31, 2019, and Rs 31,710 on the last day of 2018.

The rate of 10 gram 22-carat gold in Mumbai was Rs 45,985 plus 3 percent GST, while 24-carat 10 gram was Rs 50,202 plus GST. The 18-carat gold quoted at Rs 37,652 plus GST in the retail market.

“Gold has been on a rise for the last few years and the rally exacerbated this year owing to COVID-19. Gold surged to a record high level of near $2080/oz in August 2020. However, it witnessed a correction of about 15 percent reaching a low of near $1770/oz in late November, before recovering back to currently traded $1880/oz. The recent sell-off has been mainly due to profit-taking amid hopes of a COVID -19 vaccine and year-end position squaring. Although it has slightly dented market sentiment overall outlook for gold is still upbeat," said Ravindra Rao, VP-Head Commodity Research at Kotak Securities.

“Escalating virus situation is proving to be a challenge for the global economic recovery. Apart from this, lower interest rates worldwide and US Dollar's downtrend might prove positive for the yellow metal. Currently, Gold spot is flirting near $1900/oz. A sustained break might be seen in 2021 which might push the prices to $1980/oz and then $2050/oz," Rao noted.

The US dollar traded lower at 89.59, or down 0.06 percent, against a basket of six currencies. The dollar index has slumped to two years low, weighed down by reduced safe-haven buying.

Gold holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund were unchanged for second straight day at 1,169.86 tonnes.

Spot gold was flat at $1,894.49 an ounce at 1219 GMT in London trading.

MCX Bulldesk was slightly up 15 points, or 0.1 percent, at 15,700 at 17:50. The index tracks the real-time performance of MCX Gold and MCX Silver futures.

“Gold inches higher, heading for its best year in a decade, as a weaker US dollar outweighed pressure from a top Republican lawmaker's remark that a bill to increase US pandemic aid checks was unlikely to get Senate approval soon. In a blow to US President Trump's demand for an increase in coronavirus relief checks to $2,000, Republican Senate Majority leader Mitch McConnell refused a quick vote on the bill, saying it had 'no realistic path to quickly pass the Senate'. Also boosting the metal's appeal to other currency holders, the dollar edged lower and hit its lowest since April 2018,” Navneet Damani, Vice President, Motilal Oswal, said. 

The broader trend on COMEX could be in the range of $1,875-1,905 and on domestic front prices could hover in the range of Rs 49,850- 50,450.  

The gold/silver ratio currently stands at 74.50 to 1, which means the amount of silver required to buy one ounce of gold.

Silver prices climbed Rs 287 to Rs 67,383 per kg from its closing on December 30.

In the futures market, the gold prices touched an intraday high of Rs 50,220 and an intraday low of Rs 50,002 on the Multi-Commodity Exchange (MCX). For the February series, the yellow metal touched a low of Rs 41,560 and a high of Rs 57,100.

Gold futures for February delivery gained Rs 65, or 0.13 percent, at Rs 50,200 per 10 gram in evening trade on a business turnover of 10,278 lots. The same for April rose Rs 99, or 0.20 percent, at Rs 50,084 on a business turnover of 3,178 lots.

The value of the February and April’s contracts traded so far is Rs 1,884.91 crore and Rs 24.58 crore, respectively.

Similarly, Gold Mini contract for January jumped Rs 133, or 0.27 percent, at Rs 50,014 on a business turnover of 466 lots.

Trading Strategy

Tapan Patel- Senior Analyst (Commodities), HDFC Securities

Gold prices have kept range bound trading during the week on lack of important economic data and mixed global cues. The worries over economic recovery on pandemic fears have supported bullion prices to trade firm limiting downside.

We expect gold prices to trade sideways to up with COMEX gold resistance at $1,910, support at $1,880. MCX Gold February support lies at Rs 49,800 with resistance at Rs 50,400.

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Sandeep Sinha
first published: Dec 31, 2020 07:03 pm