Gold prices zoom above Rs 50,000/10 gm on weak dollar; silver rises by Rs 926 a kg

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Gold prices crossed Rs 50,000 per 10 gram for the first time since November 23 in the Mumbai retail market on weakness in the US dollar. The precious metal traded higher on the prospects for more stimulus measures after the US Federal Reserve kept the rate near zero until the economic recovery is complete.

The rate of 10 gram 22-carat gold in Mumbai was Rs 45,806 plus 3 percent GST, while 24-carat 10 gram was Rs 50,007 plus GST. The 18-carat gold quoted at Rs 37,505 plus GST in the retail market.

The US dollar traded weaker at 89.80, or down 0.61 percent in the evening session against a basket of currencies.

Gold holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, were unchanged at 1,170.15 tonnes.

Spot gold rose by $12.70 at $1,877.51 an ounce at 1155 GMT in London trading.

MCX Bulldesk has surged 186 points, or 1.21 percent, to 15,601 at 17:26. The index tracks the real-time performance of MCX Gold and MCX Silver futures.

“COMEX gold trades higher near $1882/oz amid continued weakness in US Dollar Index. After some consolidation, the US Dollar Index is now below the 90 mark, trading weaker by 0.55 percent supporting the yellow metal. Other than weak US dollar, gold is supported by Fed’s stance to keep the interest rate low and increased efforts to finalise the US stimulus deal. More strength might be seen in gold prices once the ETF inflows start coming. A technical breakout might happen if the price closes above $1,888 which might be the first indication of a temporary bottom,” Ravindra Rao, VP-Head, Commodity Research at Kotak Securities.

The gold/silver ratio currently stands at 75.23 to 1, which means the amount of silver required to buy one ounce of gold.

Silver prices climbed Rs 926 to Rs 66,469 per kg from its closing on December 16.

In the futures market, the gold rate touched an intraday high of Rs 50,174 and an intraday low of Rs 49,720 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 499, or 1.01 percent, at Rs 50,096 per 10 gram in evening trade on a business turnover of 11,729 lots. The same for April increased Rs 537, or 1.08 percent, at Rs 50,140 on a business turnover of 1,462 lots.

The value of the February and April’s contracts traded so far is Rs 2,863.16 crore and Rs 44.05 crore, respectively.

Similarly, Gold Mini contract for January edged higher by Rs 443, or 0.89 percent at Rs 49,987 on a business turnover of 12,509 lots.

Trading strategy

Tapan Patel- Senior Analyst (Commodities), HDFC Securities

Gold prices rallied on US stimulus expectations and accommodative stance from US FOMC with ultra-low interest rates. Gold prices got a boost from stimulus hopes and weaker dollar index which fell below 90 mark on Thursday.

We expect gold prices to trade higher with COMEX gold resistance at $1,890 and support at $1,850. MCX Gold February support lies at Rs 49,600 with resistance at Rs 50,200.

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

Technically, spot gold is trading on a positive note above the 21-DMA. It is resisting below $1,900 levels. It could test the levels of $1,930-1,950 with support placed at $1,870-1,850 levels.

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