Gold prices to trade sideways to up this week, support at Rs 50200; recession fears, inflation cap downside

Bullion prices witnessed decline for the week as aggressive FED rate hike and monetary tightening by other central banks boosted buying in dollar.

gold, silver, bullion
We expect gold prices to trade sideways to up this week with COMEX spot gold resistance at $1870 per ounce and support at $1800 per ounce

By Tapan Patel

Commodity prices traded lower with most of the commodities in the non-agro segment ended lower during the week as stronger dollar and recession fears dampened demand.  Bullion prices declined on aggressive FED despite record inflation. Base metals traded weak on China lockdown and demand growth concerns. Crude oil prices plunged by more than 9% as recession fears triggered selling from traders. 

Gold prices traded higher with spot gold prices at COMEX rose by more than 1% to $1872 per ounce for the week. Gold August futures at MCX gained by 0.77% to Rs. 51701 per 10 gram along with rupee depreciation. The spot rupee fell by 0.27% at 77.84 against the dollar for the week hitting all-time low. Gold ETF holdings witnessed inflows as holdings at SPDR Gold Shares rose to 1068 tonnes from previous week’s 1066 tonnes. The CFTC data showed that money managers increased their net position by 7100 lots last week.

Silver prices ended down with spot silver prices at COMEX fell by 0.99% to $21.67 per ounce for the week. MCX Silver July futures lost 1.60% and ended at Rs. 60937 per KG for the week. Silver prices traded under pressure during the week on weaker demand for industrial metals on recession fears. The CFTC data showed that money managers decreased their net position by 5818 lots in the last week.

Bullion prices witnessed decline for the week as aggressive FED rate hike and monetary tightening by other central banks boosted buying in dollar. The dollar index rose by 0.53% to 104.70 as the yen weakened after the Bank of Japan held firm with rock-bottom interest rates. A global stock and bond rout continued this week after the Federal Reserve raised rates by 75 basis points – the biggest increase since 1994 – to contain decades-high inflation. The move was followed by the Swiss Bank which increased rates for the first time in 15 years, while the Bank of England raised its lending rate to its highest since 2009. However, the recession fears and record inflation has capped down side in the precious metals prices. The safe haven buying in dollar and bonds has capped demand for non-interest bearing assets like gold and silver.

We expect gold prices to trade sideways to up 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. 51800 per 10 grams and support at Rs. 50200 per 10 gram. COMEX Spot silver has near term resistance at $22.90 per ounce with support at $21.10 per ounce. MCX Silver July has important resistance at Rs. 63800 per KG and support at Rs. 59200 per KG.

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

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