Gold price slips on stronger dollar; bullion rates may move sideways to down this week

Bullion prices traded down reporting a second weekly drop after rallying to a five-month high in November.

Gold price moved lower last week. (Image: REUTERS)

By Tapan Patel

Commodity prices traded lower with most of the commodities in the non-agro segment witnessed selling last week with crude oil falling the most. Crude oil prices plunged by more than 10% on higher supply pressure and demand growth worries. The fast-spreading virus cases in Europe and South Africa has raised demand worries for non-agro commodities. Base metals witnessed additional pressure on China growth worries and stronger dollar.

Gold prices traded lower with spot gold prices at COMEX fell by more than 2% to $1802 per ounce for the week. Gold December futures at MCX declined by 2.55% at Rs. 47585 per 10 gram despite of rupee depreciation. The spot rupee ended 0.86% lower to 74.87 against the dollar for the week. Gold ETF holdings witnessed inflows as holdings at SPDR Gold Shares rose to 993 tonnes from previous week’s 985 tonnes. 

Silver prices witnessed heavy selling with spot silver prices at COMEX fell by 5.94% at $23.16 per ounce for the week. MCX Silver December futures lost 5.36% to Rs. 62045 per KG for the week. Silver prices underperformed gold with selling in industrial metals on demand worries from China and Europe. 

Bullion prices traded down reporting a second weekly drop after rallying to a five-month high in November. The precious metals prices declined on stronger dollar on hawkish Fed stance and speculation of a sooner rate hike. The Fed policymakers said they were open to more rapid removal of pandemic-era stimulus in response to accelerating inflation. The dollar index is hovering near 16 month high at 96.09 for the week while 10 year US Treasury yields fell to 1.48% in last week. Bullion prices capped downside on Friday with fall in equity indices on renewed virus worries in Europe and fear of new variant in South Africa. The trader and investors will await for US FOMC meeting outcome to gauge any hint over interest rate hike. 

We expect gold prices to trade sideways to down in the coming week with COMEX spot gold resistance at $1833 per ounce and support at $1780 per ounce. At MCX, Gold February prices have near term resistance at Rs. 48400 per 10 grams and support at Rs. 47500 per 10 gram. COMEX Spot silver has near term resistance at $24.30 per ounce with support at $22 per ounce. MCX Silver March has important resistance at Rs. 64000 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 own. Please consult your financial advisor before investing.)

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