By Tapan Patel
Commodity prices traded higher with most of the commodities in the non-agro segment witnessing buying during the week. Bullion prices traded up on inflation worries and fall in bond yields while crude oil prices rallied nearly 2% on higher demand optimism and lower supplies. Base metals complex traded higher on weaker dollar and supply disruption fears from Europe.
Gold prices traded higher with spot gold prices at COMEX rose by more than 1% to $1829 per ounce for the week. Gold February futures at MCX ended marginal down at Rs. 48099 per 10 gram pressured by sharp rupee appreciation. The spot rupee fell by 0.90% at 74.34 against the dollar for the week. Gold ETF holdings witnessed inflows as holdings at SPDR Gold Shares rose to 976 tonnes from previous week’s 974 tonnes. The CFTC data showed that money managers increased their net long positions by 9101 lots in last week.
Silver prices traded higher with spot silver prices at COMEX rose by 1.25% at $23.31 per ounce for the week. MCX Silver March futures ended over half a percent up to Rs. 62660 per KG for the week. Silver prices outperformed gold with rally in industrial metals on lower supply expectations and higher demand.
Bullion prices traded higher for the third consecutive week with Gold prices ending to six week high levels still registering the steepest annual drop since 2015. Bullion prices rose on weaker dollar and plunge in US bond yields. The dollar index declined by 0.36% to 95.67 while US 10 year bond yields fell to 1.51% keeping investors’ appetite up for precious metals. Bullion prices ended the year in red as the US Fed has announced to end its pandemic-era stimulus and intends to raise interest rates by as early as March, the first time in two years since the Covid-19 outbreak of March 2020. The higher inflation is still a bull case scenario for precious metals in medium term. The Consumer Price Index grew by 6.8% in the year to November, its most since 1982. The negative real bond yields despite of Fed tapering may support bullion prices to trade up.
We expect gold prices to trade sideways to up in coming week with COMEX spot gold resistance at $1860 per ounce and support at $1790 per ounce. At MCX, Gold February prices have near term resistance at Rs. 48700 per 10 grams and support at Rs. 47600 per 10 gram. COMEX Spot silver has near term resistance at $24.30 per ounce with support at $22.60 per ounce. MCX Silver March has important resistance at Rs. 64500 per KG and support at Rs. 61000 per KG.
(Tapan Patel is a Senior Analyst (Commodities) at HDFC securities. Views expressed are the author’s own. PLease consult your financial advisor before investing.)