Gold climbed Rs 548 to Rs 46,649 for 10 gram in the Mumbai retail market, tracking positive global cues and bargain buying. The yellow metal traded firm on the discovery of new strains of COVID-19, increasing safe-haven appeal but rising US treasury yields and strong dollar capped the upside.
The bullion fell to a seven-month low during last week, witnessing heavy selling on risk-on sentiment. The yellow metal declined with a rise in the US bond yield and strong equity indices boosted by positive economic data.
Gold halted its six-day decline on February 19 as prices reversed from important support of $1,760 per ounce backed by inflation hedge and $1.9 trillion stimulus hopes. US Federal Reserve balance sheet rose to a fresh record high of $7.512 trillion, a $124 billion sequential uptick and highest since May.
The rate of 10 gram 22-carat gold in Mumbai was Rs 42,730 plus 3 percent GST, while 24-carat 10 gram was Rs 46,649 plus GST. The 18-carat gold quoted at Rs 34,987 plus GST in the retail market.
The CFTC data showed that money managers decreased net long positions by 2,2270 lots in the previous week with a slump in gold prices.
The US 10-year bond yield surged to 1.37 percent, gaining 174 percent from the lows of 0.50 it hit on March 8, 2020.
The dollar dropped to 90.27, or 0.11 percent, against a basket of six currencies.
Gold holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund decreased by 5.25 tonnes to 1,127.64 tonnes.
Spot gold soared by $12.83 to $1,796.96 an ounce at 1214 GMT in London trading.
MCX Bulldesk edged up 94 points or 0.64 percent, at 14,879 at 17:44. The index tracks the real-time performance of MCX Gold and MCX Silver futures.
Navneet Damani, Vice President, Motilal Oswal said, “Gold prices edged higher to recover from an over seven-month low touched in the previous session as the dollar weakened, though higher US Treasury yields capped bullion gains."
President Joe Biden's push for a $1.9-trillion COVID-19 relief bill took a step forward on February 19 as a US House of Representatives committee unveiled the legislation Democrats hope to get passed by late next week, hence all updates regarding the same would be very important to watch for, he said.
Fed officials mentioned in their comments last week said the risk of ongoing business failures in the United States "remains considerable" even as the economy emerges from the coronavirus pandemic, hence giving some support to the metal prices. "With these comments, the rise of the new variant of coronavirus is also lending a hand to the bullion,” Damani said.
The broader range on Comex could be between $1,780- 1,810 and on the domestic front, prices could hover in the Rs 47,200-46,780 range.
“Comex gold trades higher near $1,796 /oz amid support from weaker US dollar, rising inflation expectations, hopes of additional US stimulus and loose monetary policy stance of central banks. However, weighing on price is continuing ETF outflows and higher US and global bond yields. Gold has recovered from recent lows however the gains will be limited until US bond yields correct," Ravindra Rao, VP- Head Commodity Research at Kotak Securities.
The gold/silver ratio currently stands at 67.24 to 1, which means the number of silver ounces required to buy one ounce of gold.
Silver prices surged by Rs 956 to Rs 69,370 a kg from its closing on February 19.
In the futures market, the gold rate touched an intraday high of Rs 46,642 and an intraday low of Rs 46,238 on the Multi-Commodity Exchange (MCX). For the April series, the yellow metal touched a low of Rs 45,861 and a high of Rs 51,931.
Gold futures for April delivery gained Rs 359, or 0.78 percent, at Rs 46,556 per 10 gram in evening trade on a business turnover of 13,127 lots. The same for June edged higher Rs 350, or 0.76 percent, at Rs 46,690 on a business turnover of 2,325 lots.
The value of the April and June contracts traded so far is Rs 2,992.67 crore and Rs 110.07 crore.
Similarly, Gold Mini contract for March rose Rs 309, or 0.67 percent, at Rs 46,404 on a business turnover of 18,140 lots.
Trading Strategy
Tapan Patel, Senior Analyst (Commodities), HDFC Securities
Gold prices traded firm on dollar decline and weak equity indices on pandemic worries. Gold prices managed to hold support at $1,760 per ounce rebounding on bargain buying.
We expect gold to trade sideways-to-up, with Comex spot gold support lying at $1,760 and resistance at $1,800. MCX Gold April support lies at Rs 45,900 and resistance lies at Rs 46,600.
Kshitij Purohit, Product Manager, Currency & Commodities, CapitalVia Global Research Limited
International gold bounced back from the lowest levels since June 2020. It is trading below $1,800 level and may continue to stay there. On the MCX, prices breached the resistance at Rs 46,500 levels and may further rise to Rs 47,000 levels in the upcoming session.
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