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Gold prices touch Rs 49,000/10 gram ahead of Budget; silver gains Rs 3,759 a kg

The gold/silver ratio currently stands at 70.83 to 1, which means the number of silver ounces required to buy one ounce of gold.

Mumbai / January 29, 2021 / 07:40 PM IST

Gold prices rose by Rs 407 to Rs 49,393 per 10 gram in the Mumbai retail market on firm global cues and a weak equity market. However, the gains were capped by a firm rupee. The yellow metal had gained Rs 253 or 0.52 percent during the week in the domestic market.

The rate of 10 gram 22-carat gold in Mumbai was Rs 45,244 plus 3 percent GST, while 24-carat 10 gram was Rs 49,393 plus GST. The 18-carat gold quoted at Rs 37,045 plus GST in the retail market.

Volatility has surged immensely in the past two trading sessions with global equity indices coming under pressure tracking Wall Street retail-trading frenzy. The volatility witnessed by equity indices has spilled over to commodities too with silver prices being the most impacted.

Ahammed MP, Chairman, Malabar Gold & Diamonds, said, “In the Union Budget 2021-22, the government must reduce the customs duty to curb large-scale gold smuggling in the country. It will boost demand and strengthen consumer confidence. High taxes lead to large-scale smuggling and tax evasion.” 

“The government must assess the adverse impact of higher custom duty on the jewellery trade and propose duty reduction to make both trade and consumption of gold transparent. To bring in transparency in pricing, the government should set up a committee comprising government officials and members of the jewellers' associations which will set the board rate. If customs duty on gold and diamonds is increased, it will be difficult for the market to bounce back and grow,” he said.

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Meanwhile, the US dollar is trading higher at 90.55, or 0.13 percent against a basket of six currencies on safe-haven demand.

Gold holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, decreased by 4.4 tonnes to 1,164.79 tonnes, the lowest since January 14.

Spot gold soared by $20.25 to $1,863.03 an ounce at 1200 GMT in London trading.

MCX Bulldesk was up 273 points, or 1.78 percent, at 15,588 at 17:31. The index tracks the real-time performance of MCX Gold and MCX Silver futures.

Navneet Damani, Vice President, Motilal Oswal, said: “Gold prices were steady as investors waited for developments around a US stimulus package, although the metal was on course to post a weekly and monthly decline hurt by a stronger dollar and yields. On other hand, silver prices surged higher yesterday amidst the Reddit noise hovering in the market, although confirmation on the same is still awaited.” 

“The IMF urged that fiscal support should stay in place until an economic recovery is firmly underway even as global debt is increasing at a significant pace. US jobless claims fell in the latest week, while Q4 GDP figures met expectations, supporting the precious metal prices. On the other hand, outflow in SPDR holdings is hurting the overall sentiment for gold prices,” he said. 

The broader trend on COMEX could be in the range of $1825- 1865 and on the domestic front, prices could hover in the range of Rs 48,850- 49,300.

“Although COMEX gold trades higher above $1852/oz, the undertone is mixed as support from rising virus cases, mixed economic data from major economies and US stimulus expectations are countered by continued ETF outflows and lack of any cues about fresh measures by major central banks. Gold may remain choppy reflecting mixed trade in US dollar. However, rising virus cases and US stimulus expectations may lend some support,” said Ravindra Rao, VP- Head Commodity Research at Kotak Securities.

The gold/silver ratio currently stands at 70.83 to 1, which means the number of silver ounces required to buy one ounce of gold.

Silver prices climbed by Rs 3,759 to Rs 69,726 per kg from its closing on January 28. The gains are largely attributed to buying frenzy caused by recommendations making rounds on the social media platform that silver is going to go up drastically due to supply shortage. However, caution is advised as the recent rally has no fresh triggers and is completely driven by speculation.

In the futures market, the gold rate touched an intraday high of Rs 49,245 and an intraday low of Rs 48,624 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 soared Rs 616, or 1.27 percent, at Rs 49,240 per 10 gram in evening trade on a business turnover of 1,356 lots. The same for April edged higher by Rs 598, or 1.22 percent, at Rs 49,534 on a business turnover of 12,294 lots.

The value of the February and April’s contracts traded so far is Rs 2,256.63 crore and Rs 2,286.31 crore, respectively.

Similarly, Gold Mini contract for February jumped Rs 520, or 1.07 percent at Rs 49,192 on a business turnover of 5,618 lots.

Trading Strategy

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

Technically, international gold is trading with bullish momentum since morning where it is sustaining above $1,830-1,820 levels. We may expect the market to test the levels of $1,890-1,900 on the upside in the upcoming sessions. Bullish sentiments may dominate the upcoming sessions and price may test the resistance levels of Rs 49,600-49,800.

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Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Sandeep Sinha
first published: Jan 29, 2021 07:40 pm

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