Gold, silver under pressure as dollar strengthens; expect bullion prices to trade sideways this week

June 14, 2021 9:50 AM

The precious metals declined on strong dollar recovery following positive US data as higher inflation signalled economic recovery. Bullion prices hovered in narrow trading range on market speculation and investors’ dilemma over FED policy actions.

Gold priceHallmarking is a purity certification of precious metals and was voluntary in nature till now. (Image: REUTERS)

By Tapan Patel

Commodity prices traded mixed with most of the commodities in the Non-Agro segment traded firm except gold. Crude oil prices extended rally on strong fuel demand recovery form US and Europe. Base metals ended in green as China continued to increase prices discarding inflation worries. Bullion prices traded under pressure on stronger dollar following strong economic data.

Gold prices traded lower with spot gold prices at COMEX fell by 0.74% to $1877 per ounce for the week. Gold prices at MCX ended in green by 0.64% at Rs 48,903 per 10 gram supported by rupee depreciation. The spot rupee fell by 0.10% against the dollar for the week extending weekly declines. Gold ETF holdings witnessed inflows as holdings at SPDR Gold Shares rose to 1045 tonnes from 1043 tonnes for the week. The CFTC data showed that money managers decreased their net long positions by 2782 lots in last week.

Silver prices ended in green with spot silver prices at COMEX rose by 0.45% at $27.92 per ounce for the week. MCX Silver July futures ended up by 0.96% to Rs 72,227 per KG. Silver prices witnessed some support following buying on industrial metals. The CFTC data showed that money managers increased their net long positions by 1855 lots in last week.

Bullion prices traded under pressure during the week with gold prices at COMEX struggled to sustain above $1900 per ounce for the second week while silver prices capped caped downside with firm base metals. The precious metals declined on strong dollar recovery following positive US data as higher inflation signalled economic recovery. Bullion prices hovered in narrow trading range on market speculation and investors’ dilemma over FED policy actions. The dollar index ended with 0.46% gains at 90.56 while US 10 year treasury yields fell to 1.45% during the week. The dollar index fetched safe haven buying from precious metals ahead of US FOMC meeting this week as recent positive data from US has raised market expectations of change in FED stance. Bullion prices may keep current trading range with bullish bias for short term awaiting fresh triggers. 

We expect gold prices to trade sideways to up in the coming week with COMEX spot gold resistance at $1920 per ounce and support at $1850 per ounce. At MCX, Gold August prices have near term resistance at Rs 49,700 per 10 grams and support at Rs 48,200 per 10 gram. COMEX silver spot has near term resistance at $28.90 per ounce with support at $26.80 per ounce. MCX Silver July has important resistance at Rs 74,400 per KG and support at Rs 69,800 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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