Gold prices plunged by Rs 1,122 to Rs 46,525 per 10 gram in the Mumbai retail market continued selloff in the international market after firm jobs data and expectation of early Fed tapering. The yellow metal declined to more than a four-month low but managed to recoup early losses and traded near $1,750/oz.
The price of 10 gram, 22-carat gold in Mumbai was Rs 42,617 plus 3 percent GST, while 24-carat 10 gram stood at Rs 46,525 plus GST. The 18-carat gold is quoted at Rs 34,894 plus GST in the retail market.
Tapan Patel- Senior Analyst (Commodities), HDFC Securities said, “Gold prices witnessed sell-off on Friday on better than expected rise in US Job numbers which fuelled expectations of sooner FED tapering. The US Federal Reserve Vice Chairman earlier said that Fed may look to raise interest rates sooner than 2023. The US July job market report exceeded expectations reflecting the opposite of the trend signalled from ADP numbers.
The CFTC data showed that money managers increased their net long positions by 851 lots in last week.
No major data is expected on the economic calendar today, although U.S. inflation data is scheduled later this week which will be important to watch.
The US dollar traded modestly weaker at 92.75, down 0.06 percent against a basket of six rival currencies.
Gold holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell by 2.32 tonnes to 1,025.29 tonnes. The ETF has a market value of $58.10 billion.
Spot gold decreased by $17.73 to $1,745.22 an ounce at 1204 GMT in London trading.
MCX Bulldesk crashed by 176 points or 1.24 percent, at 14,004 at 17:35. The index tracks the real-time performance of MCX Gold and MCX Silver futures.
“Gold extended its fall, along with silver after a stronger than expected US jobs report on Friday which fueled the bets that the Fed may start paring back its massive monetary stimulus soon. The dollar and benchmark 10-year Treasury yields jumped after the data, denting non-yielding gold’s appeal. U.S. employers hired the most workers in nearly a year in July and continued to raise wages, giving the economy a powerful boost. Market participants worry that the U.S. economic recovery and rising inflation might spur the Fed to pull back on unprecedented economic support,” said Navneet Damani, VP – Commodities Research at Motilal Oswal Financial Services.
The broader range on COMEX could be between $1720- 1775 and on the domestic front, prices could hover in the range of Rs 45,800- 46,335.
“COMEX gold has been volatile since the start today however it has recovered from the session low of $1677.9/oz and is currently trading 1% lower near $1746/oz. Weighing on the gold price is increased expectations of Fed’s monetary tightening post US non-farm payrolls data and some hawkish comments by Fed officials. ETF outflows also show weaker investor interest amid continuing firmness in equities. However, rising virus cases and increased geopolitical tensions have lent some support. Gold may remain under pressure as market players react to US non-farm payrolls report”, said Ravindra Rao, CMT, EPAT, VP- Head Commodity Research at Kotak Securities.
The gold/silver ratio currently stands at 72.48 to 1, which means 72.48 ounces of silver is required to buy an ounce of gold.
Silver prices crashed by Rs 2,541 to Rs 64,186 per kg against its closing price on August 6.
In the futures market, the gold rate touched an intraday high of Rs 46,386 and an intraday low of Rs 45,956 on the Multi-Commodity Exchange (MCX). For the October series, the yellow metal touched a low of Rs 45,956 and a high of Rs 50,040.
Gold futures for October delivery fell Rs 410, or 0.88 percent, to Rs 46,230 per 10 gram in evening trade on a business turnover of 13,606 lots. The same for December tumbled Rs 384, or 0.82 percent, to Rs 46,392 on a business turnover of 1,197 lots.
The value of October and December’s contracts traded so far is Rs 2,631.18 crore and Rs 88.34 crore, respectively.
Similarly, Gold Mini contract for September slipped Rs 405, or 0.87 percent at Rs 46,277 on a business turnover of 17,401 lots.
Trading Strategy
Tapan Patel- Senior Analyst (Commodities), HDFC Securities
We expect gold prices to trade sideways to down with COMEX spot gold resistance at $1760 and support at $1670 per ounce. MCX Gold October support lies at Rs. 45900 and resistance at Rs.46600 per 10 gram.
Kshitij Purohit, Product Manager, Currency & Commodities, CapitalVia Global Research Limited
Technically, International Gold is trading with a bearish bias near $1,750. Prices breached the major support levels of $1,798-1,790 levels in the previous session and the market declined more than $80. On the domestic front, MCX October gold is trading with negative bias since morning. In the previous session, precious declined approximately 1,000 points and we may witness bearish momentum to continue during the evening session where the price may trade below Rs 46,000 levels in the coming sessions.
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