By Saumil Gandhi
A sharp selloff was witnessed in most commodities in the previous week. Silver was the top loser; prices tumbled more than 6.0% in the previous week followed by Zinc and Copper dropped by 5.10% and 3.80% respectively. Base metals price remained under pressure throughout the last week on the back of lower-than-expected recovery in top metal consumer China exacerbated worries over the demand outlook against rising supplies. Gold prices managed to trim heavy losses and settled marginally down by 0.30%. Crude oil gave up initial gain and closed lower by 1.82%, posting its fourth consecutive weekly decline. Natural gas prices moved higher this week as concern about lower supply after many companies cut their production.
Comex spot gold price declined by 0.30% and settled at $2010.0 per ounce in the previous week. Gold prices throughout the last week traded volatile over the mix fundamentals. Rally in US dollar and lack of follow up buying near resistance level pushed price back while weaker US macro data, a debt-ceiling standoff and concerns around banking turmoil boosted safe-haven demand. Another supportive factor for precious metal is market pricing in multiple US rate cuts later this year, which could be beneficial for non-yielding metal. In the domestic market MCX Gold June contract gained marginally by 0.43% and closed at Rs 60,887 per 10 grams. Domestic market gold rate supported by weaker Rupee.
Comex silver price witnessed sharp selloff during the previous week and price fell to five weeks low as concern about demand on the back of weak economic recovery and rally in US dollar, for the week price down by 6.60% and closed at $23.96 per ounce. MCX Silver July future price plunged by 5.18% and settled at Rs 73,054 per 1 kg. Silver rate experienced a much more dramatic selloff than gold during the previous week with a downside breakout added speculative selling and price fell to its lowest level since April 4. That seemed to be the theme across the industrial metals, as copper also broke out to the downside.
Looking forward, after last week’s reversal in the bullion complex, we expect gold and silver prices to correct further, however gold price remains supported by safe haven demand amid mounting fears over the US debt-ceiling crisis and banking sector crisis. On the technical front, Comex spot gold having immediate support at $1980 per ounce below that price will likely to fall towards $1965 per ounce and face resistances at $2045/$2060 per ounce. MCX Gold June future having supports at Rs 60,470/59,700 per 10 grams and resistances at Rs 61,400/61,850 per 10 grams. Comex Silver first support at $23.40 below that price should retest $22.70 level and have resistances at $24.80/$26.0 per ounce. MCX Silver July future price find supports at Rs 72,500/71,300 per 1kg and face resistances at 75,100/76,400 per 1 kg for the week.
(Saumil Gandhi, Senior Analyst (Commodities), HDFC Securities. Views expressed are author’s own. Please consult your financial advisor before investing.)