Gold price rises on fear of global inflation; expect rates to move sideways to up this week

October 18, 2021 8:24 AM

We expect gold prices to trade sideways to up in the coming week with COMEX spot gold resistance at $1800 per ounce and support at $1750 per ounce.

Gold priceBullion prices traded higher during the previous week on safe haven buying on global inflation worries and a weaker dollar. (Image: REUTERS)

By Tapan Patel

Commodity prices traded higher with most of the commodities in the non-agro segment rallied during the week supported by a weaker dollar. Bullion prices traded higher on inflation worries while crude oil prices rallied on higher demand and lower supply concerns. Base metals traded higher with Zinc gaining nearly 20% for the week on supply disruptions due to power shortages.

Gold prices traded firm with spot gold prices at COMEX ended 0.60% up to $1768 per ounce for the week. Gold December futures at MCX rose by 0.37% to Rs 47213 per 10 gram supported by rupee depreciation. The spot rupee fell by 0.36% to 75.26 mark against the dollar for the week. Gold ETF holdings continued outflows as holdings at SPDR Gold Shares declined to 980.10 tonnes from previous week’s 985 tonnes. The CFTC data showed that money managers increased their net long positions by 1976 lots in last week.

Silver prices traded higher with spot silver prices at COMEX rallied by 2.79% at $23.31 per ounce for the week. MCX Silver December futures rose by more than 2% to Rs 63271 per KG for the week. Silver prices outperformed gold supported by strong rally in industrial metals over higher demand. The CFTC data showed that money managers increased their net long positions by 342 lots in last week.

Bullion prices traded higher during the previous week on safe-haven buying on global inflation worries and a weaker dollar. The precious metals prices gained momentum with rising energy cost for industries and possible rise in inflation ahead of power shortage in winter. Bullion prices pared some of weekly gains on Friday with rise in US bond yields as better than expected retail sales data spurred expectations of sooner FED tapering. The US retail sales for September showed a growth of nearly 14% year on year and 0.7% since August. The dollar index ended 0.14% lower while 10 year US Treasury yields rose to 1.575% on Friday. Gold prices are facing strong resistance near $1800 per ounce on charts to resume uptrend.

We expect gold prices to trade sideways to up in the coming week with COMEX spot gold resistance at $1800 per ounce and support at $1750 per ounce. At MCX, Gold December prices have near term resistance at Rs 47900 per 10 grams and support at Rs 46700 per 10 gram. COMEX silver spot has near term resistance at $23.90 per ounce with support at $22.50 per ounce. MCX Silver December has important resistance at Rs 65000 per KG and support at Rs 60200 per KG.

(Tapan Patel is a Senior Analyst (Commodities) at HDFC Securities. Views expressed are the author’s won. Please consult your financial advisor before investing.)

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