Gold prices surge to record high of Rs 53,277 per 10 gram in the Mumbai bullion market on rupee depreciation. The yellow metal prices steadied as riskier assets become more attractive after the Fed announced support to the COVID-affected US economy.
Federal Reserve chief Jerome Powell said that it will do what it can for as long as possible to support the economy but neither gave any hint of major changes in its stance nor said anything negative about the economy.
The fall in dollar index amid dovish Fed stance and rising COVID-19 pandemic worries supported gold prices to trade near all time highs. Gold is also getting support from the lack of progress in the US on negotiations for another COVID-19 stimulus package. President Donald Trump dismissed Wednesday Democratic demands for aid to cash-strapped cities. The jobless aid support offered by the government expires tomorrow.
According to a report from World Gold Council in its Q2 2020, demand for gold India for Q2 2020 fell by 70 percent to 63.7 tonnes from 213.2 tonnes in the corresponding period last year.
Somasundaram PR, Managing Director, India, World Gold Council said, “Q2 2020 was defined by lockdowns and high prices, both of which acted in combination to keep India’s gold demand record low at 63.7 tonnes, down 70 percent. Sales trend during the window of opportunity afforded by relaxation of lockdown in select cities do point to healthy latent demand that should surface once COVID turbulence is behind us. Demand for jewellery dropped by 74 percent to 44 tonnes, in an atmosphere of fear and uncertainty where weddings were postponed or just turned out to be uncharacteristically quiet and private.”
The rate of 10 gram 22-carat gold in Mumbai was Rs 48,802 plus 3 percent GST, while 24-carat 10 gram was Rs 53,277 plus GST. The 18-carat gold quoted at Rs 39,958 plus GST in the retail market.
Navneet Damani, Vice President, Motilal Oswal said, "Gold prices fell at the mercy of Powell statements. Prices edged lower in the early morning session, as riskier assets seemed more attractive for investors after Fed said to support the coronavirus battered US economy, although a weaker dollar limited losses for the bullion. The fed said it will keep its interest rate target range low until it is confident the economy has weathered the COVID-19 pandemic and is on track for maximum employment and price stability goals."
Market participants will be keeping an eye on the US advance GDP number; if reported better than expectation, it could lend support to the metal prices. SPDR Gold Trust holdings fell 0.1 percent to 1,241.96 tonnes on Wednesday. The broader trend on COMEX could be in the range of USD 1920-1995 and on domestic front prices could hover in the range of Rs 52,770- 53,700.
“COMEX gold trades moderately lower near USD 1950/oz amid rebound in US Dollar. The US Dollar index that hit a low of 93.18 has rebounded as is trading near 93.68 as of this writing. Gold has rallied sharply in last few days however the momentum is weakening and we may see some corrective dips. Focus today would be on the GDP data from US and Europe,” said Ravindra Rao, VP- Head Commodity Research at Kotak Securities.
The gold/silver ratio currently stands at 86.26 to 1.
Silver prices declined by Rs 2,540 to Rs 61,760 per kg from its closing on July 29.
In the futures market, gold rate touched an intraday high of Rs 53,429 and an intraday low of Rs 52,759 on the Multi-Commodity Exchange (MCX). For the August series, the yellow metal touched a low of Rs 39,200 and a high of Rs 53,429.
Gold futures for August delivery slipped Rs 272, or 0.51 percent, at Rs 52,915 per 10 gram in evening trade on a business turnover of 1,028 lots. The same for October delivery edged lower Rs 264, or 0.50 percent, at Rs 52,775 on a business turnover of 16,367 lots.
The value of the August and October contracts traded so far is Rs 1,095.02 crore and Rs 3,773.36 crore, respectively.
Similarly, Gold Mini contract for September eased Rs 245, or 0.46 percent at Rs 52,810 on a business turnover of 11,326 lots.
MCX Gold price has broken trendline channel support and price is expected to trade negatively. Sustaining below Rs 52,800 would drag price down lower towards Rs 52,500-52,400 level in intraday, according to Axis Securities.
On the hourly chart, price has started trading below 9 and 21 EMA which is a bearish sign.
At 12:25 (GMT), spot gold was down USD 16.82 at USD 1,954.03 an ounce in London trading.