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Gold prices up Rs 96 to Rs 48,222/10 gm on safe-haven, risk aversion; Silver corrects Rs 810 a kg

Gold has managed to hold above $1800/oz level and may benefit from safe-haven buying however any major upside will be challenged by a stronger US dollar.

July 20, 2021 / 06:39 PM IST

Gold prices jumped by Rs 96 to Rs 48,222 per 10 gram in the Mumbai retail market on positive global cues and renewed risk aversion in global financial markets, however, the upside was capped by a sharp gain in the rupee. The surging cases of Delta variant of coronavirus and rising inflationary pressure gave safe-haven yellow metal a boost.

The price of 10 gram, 22-carat gold in Mumbai was Rs 44,171 plus 3 percent GST, while 24-carat 10 gram stood at Rs 48,222 plus GST. The 18-carat gold is quoted at Rs 36,167 plus GST in the retail market.

US Senate Democratic leader, set a procedural vote on a bipartisan $1.2 tln infrastructure bill for tomorrow, increasing pressure on negotiators as they struggled with ways to pay for the cost of the measure. 

Investors will keep their eyes on the ECB policy meet and preliminary Manufacturing and Service PMI data expected from major economies, scheduled later this week.

The US dollar trades near 93 marks at 92.98, up 0.09 percent against a basket of six rival currencies. The jump in the dollar index makes gold expensive for holders of other currencies.

Gold holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund were unchanged at 1,028.55 tonnes. The ETF has a market value of $60.00 billion.

Spot gold advanced by $4.33 to $1,817.07 an ounce at 1208 GMT in London trading.

MCX Bulldesk slightly up by 8 points or 0.05 percent, at 14,670 at 17:40. The index tracks the real-time performance of MCX Gold and MCX Silver futures.

“Gold prices inched higher after a steep fall witnessed last week, amidst a fall in US yields and increased fears regarding the Delta variant. On other hand, the dollar strengthened 0.2% to a more than three-month high against its rivals, limiting gold’s upside. Many countries, particularly in Asia, are struggling to curb the highly contagious Delta variant of the coronavirus and have been forced into taking lockdown measures. Investors are concerned over a relentless surge of the Delta coronavirus variant that could threaten the outlook for global economic recovery,” said Navneet Damani, VP – Commodities Research at Motilal Oswal Financial Services.

The broader range on COMEX could be between $1,806- 1,834 and on the domestic front, prices could hover in the range of Rs 47,950- 48,410.

“COMEX gold trades 0.25% higher near $1814/oz. Gold trades higher supported by lower bond yields and safe-haven buying amid increasing virus cases, US-China tensions and rising inflation concerns. However, weighing on price is firmness in the US dollar and weaker investor and consumer demand. Gold has managed to hold above $1800/oz level and may benefit from safe-haven buying however any major upside will be challenged by a stronger US dollar,” said Ravindra Rao, CMT, EPAT-Quantinsti, Head - Commodity Research at Kotak Securities Ltd.

The gold/silver ratio currently stands at 71.99 to 1, which means 71.99 ounces of silver is required to buy an ounce of gold.

Silver prices tanked by Rs 810 to Rs 66,980 per kg against its closing price on July 19.

In the futures market, the gold rate touched an intraday high of Rs 48,295 and an intraday low of Rs 47,965 on the Multi-Commodity Exchange (MCX). For the August series, the yellow metal touched a low of Rs 44,501 and a high of Rs 49,721.

Gold futures for August delivery gained Rs 26, or 0.05 percent, to Rs 48,120 per 10 gram in evening trade on a business turnover of 6,317 lots. The same for October rose Rs 10, or 0.02 percent, to Rs 48,370 on a business turnover of 8,419 lots.

The value of August and October’s contracts traded so far is Rs 1,684.68 crore and Rs 321.09 crore, respectively.

Similarly, Gold Mini contract for August jumped Rs 31, or 0.06 percent at Rs 48,100 on a business turnover of 12,951 lots.

Trading Strategy

Tapan Patel- Senior Analyst (Commodities), HDFC Securities

Gold prices pared early losses of Monday witnessing recovery on Tuesday. The fall in US treasury yields and worries over growing virus cases boosted buying in precious metals. The US 10 year treasury yields fell to 1.21% pushing gold prices up on safe-haven buying.

We expect gold prices to trade sideways to up for the day with COMEX gold support at $1795 and resistance at $1820 per ounce. MCX Gold August support lies at Rs 47,800 and resistance at Rs 48,300 per 10 gram.

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

Technically, International Gold is trading with a positive bias and may test the support level of $1,790 in the evening session. On the domestic front, MCX Gold is trading sideways to marginally bearish momentum, breaking below the support mark of 15-SMA of the hourly chart and test the psychological level of Rs 48,000.

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Sandeep Sinha