International and domestic gold prices ended flat to marginally lower this week as a rebound of the US dollar and lack of progress of the US stimulus bill weighed on rates. The yellow metal ended with a mild loss of Rs 34 or 0.07 percent for the week.
While the white metal surged Rs 2,170 or 3.21 percent for the week on a retail frenzy, calls to drive silver prices higher by buying shares in silver miners and exchange-traded funds (ETF) were circulating on social media such as Reddit and Twitter. This forced some traders to cover short positions as rumours rippled through the market about a GameStop-style squeeze driven by retail investors.
US President Joe Biden's $1.9 trillion pandemic relief proposal faces hurdles as Republicans objected to it for being too expensive and pushed for a smaller plan targeting vaccine distribution.
Meanwhile, on the central bank side of things, the US Federal Reserve's decision stuck to its dovish tone and left its key overnight interest rate near zero to maintain monetary support until there is a stronger rebound from the pandemic-triggered recession.
However, US central bank policymakers raised a worrying slowdown in the pace of the recovery, which pushed investors to the safe-haven appeal of the Greenback.
According to the World Gold Council (WGC), fourth-quarter gold demand was 28 percent lower year-on-year at 783.4 tonnes, which was the worst quarter since the middle of the Global Financial Crisis in Q2 2008.
The coronavirus pandemic was the driving factor behind weakness in consumer demand throughout 2020. Annual demand fell by 14 percent to 3,759.6 tonnes.
WGC said that India's gold demand fell by 35 percent in 2020 to 446.4 tonnes, the lowest since 1994.
“Looking ahead, next week prices could remain range-bound to weak as the US dollar continues to gain strength supported by safe-haven appeal for the Greenback,” said Sriram Iyer, Senior Research Analyst at Reliance Securities.
“lack of US stimulus progress could also keep upside capped. However, the US Senate and House of Representatives will move next week on President Joe Biden's plan to deliver COVID-19 relief to Americans and businesses reeling from the pandemic,” Iyer added.
Technically, LBMA Gold Spot gave a sharp correction from $1,875 where it ended near 200-DMA indicating a Bearish momentum in the coming week. Support is at $1,817-$1,799 levels. Resistance is at $1,871-$1,889 levels, said Iyer.
He said that MCX Gold April was unable to breach Rs 50,000 levels since past weeks below which is expected to trade sideways to marginal downside momentum. Resistance is at Rs 49,750-50,050 levels whereas support is at Rs 48,800-48,200 levels.
LBMA Silver Spot holds a resistance zone at $27.50-$27.80 levels where prices could see some downside pressure in the coming week up to $25.20-$24.00 levels while resistance is at $27.40-27.90 levels. MCX Silver March holds a resistance near 71300 levels below which could see sideways to downside momentum up to 66000-63900 levels. Resistance is at 70250-71400 levels, Iyer noted.
Reliance Securities advises its clients to deploy sell on rise strategy for April Gold near Rs 49,800-49,850 with a stop loss of Rs 50,000 and a target of Rs 49,200.
Strategy for Silver March: The brokerage firm advises sell near Rs 70,200-70,300 with a stop loss at Rs 71,300 and a target of Rs 67,500.
EVENTS TO WATCH OUT
On the calendar, markets will keenly await the monthly payroll number next week.
The other top events on the economic calendar are US jobless claims and ISM Non-Manufacturing PMI for January.
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