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Gold prices to trade sideways to down this week on demand growth worries, recession fears; support at Rs 49800

Gold prices may see some volatility this week on expectations that the Group of Seven – G7 nations may announce a ban on imports of Russian gold on Tuesday.

gold, silver, mcx
We expect gold prices to trade sideways to down this week with COMEX spot gold resistance at $1870 per ounce

By Tapan Patel

Commodity prices traded lower with most of the commodities in the non-agro segment extended decline for the week on demand growth worries and recession fears. Bullion prices declined on market expectations over aggressive FED in the July meeting. Base metals traded weak on lower demand from China and global slowdown concerns. Crude oil prices traded weak as recession fears triggered selling despite tight supply. 

Gold prices traded lower with spot gold prices at COMEX fell by 0.68% to $1827 per ounce for the week. Gold August futures at MCX declined by 0.42% to Rs. 50623 per 10 gram limiting downside on rupee depreciation. The spot rupee fell by 0.34% at 78.34 against the dollar for the week. Gold ETF holdings witnessed outflows as holdings at SPDR Gold Shares fell to 1061 tonnes from previous week’s 1075 tonnes. 

Silver prices witnessed selling with spot silver prices at COMEX fell by 2.35% to $21.16 per ounce for the week. MCX Silver July futures fell by nearly 2% and ended at Rs. 59749 per KG for the week. Silver prices decline underperforming gold on weaker demand for industrial metals and heavy selling in base metals. 

Bullion prices traded lower and reported the second weekly loss despite a decline in dollar index. The traders and investors weighed on expectations of a larger rate hike after FED chairman Jerome Powell reiterated that the central bank’s inflation fight is “unconditional” in his testimony. Some policymakers at the central bank have advocated another 75-basis point hike for July. The precious metals prices have remained under pressure despite record inflation on stronger dollar and firm bond yields. The dollar index ended 0.49% down at 104.19 while US 10 year bond yields were strong at 3.13% by the end of the week. However, the weaker economic data from the US has spurred recession fears which has capped down side. Gold prices may see some volatility this week on expectations that the Group of Seven – G7 nations may announce a ban on imports of Russian gold on Tuesday.

We expect gold prices to trade sideways to down this week with COMEX spot gold resistance at $1870 per ounce and support at $1800 per ounce. At MCX, Gold August prices have near term resistance at Rs. 51400 per 10 grams and support at Rs. 49800 per 10 gram. COMEX Spot silver has near term resistance at $22.40 per ounce with support at $20.50 per ounce. MCX Silver July has important resistance at Rs. 62500 per KG and support at Rs. 58500 per KG.

(Tapan Patel, Senior Analyst (Commodities), HDFC Securities. Views expressed are the author’s own.)

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