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Gold to trade sideways to up this week; Russia-Ukraine war, oil rates, inflation to boost MCX gold’s appeal

At MCX, Gold June prices have near term resistance at Rs. 51400 per 10 grams and support at Rs. 49800 per 10 gram.

gold, silver, bullion, MCX, commodities
We expect gold prices to trade sideways to up this week with COMEX spot gold resistance at $1870 per ounce and support at $1780 per ounce.

By Tapan Patel

Commodity prices traded higher with most of the commodities in the non-agro segment witnessing buying in the previous week supported by weaker dollar. Bullion prices rallied, rebounding from recent lows on safe haven buying over economic growth worries. Crude oil prices gained by more than 2% over tight supplies and strong demand ahead of summer season. Base metals rallied on demand growth prospectus from China with easing COVID restrictions.

Gold prices traded higher with spot gold prices at COMEX rose by 1.92% to $1846.50 per ounce for the week. Gold June futures at MCX gained by 1.92% to Rs. 50829 per 10 gram along with rupee depreciation. The spot rupee fell by 0.13% at 77.55 against the dollar for the week. Gold ETF holdings continued outflows as holdings at SPDR Gold Shares fell to 1063 tonnes from previous week’s 1082 tonnes. The CFTC data showed that money managers have decreased their net long positions by 19322 lots in the last week.

Silver prices rallied with spot silver prices at COMEX rose by 3.13% to $21.78 per ounce for the week. MCX Silver May futures rose by 3.50% to Rs. 61407 per KG for the week. Silver prices surged with a strong demand outlook for industrial metals and safe haven buying. The CFTC data showed that money managers have decreased their net long positions by 1034 lots to the three year low.

Bullion prices reported the first weekly gain in last five weeks as rising concerns over economic growth and high inflation spurred demand for the safe haven asset. The dollar index fell by more than 1% to 103.15 while global equity indices plunged for the seventh week on the tort. The weaker than expected economic data from China and US Softer economic data, including weak PMI, Jobless claims and record inflation underlined the risks to growth as the Federal Reserve gears up for its most aggressive rate-hiking cycle in decades. The yield on the benchmark 10-year U.S. Treasury note has moved down to 2.79% from May peaks of 3.2% on expectations that US FED may limit rate hikes to 50 bps in upcoming meetings. The geopolitical risk over Russia-Ukraine conflict, higher oil prices and inflation worries are the supporting factors which may limit downside in the precious metals. Gold prices have rebounded from a strong support range of $1780 per ounce setting course for $1870/$1920 per ounce for a short term. Silver prices will have to cross the resistance barrier of $22.10 per ounce to resume uptrend.

We expect gold prices to trade sideways to up this week with COMEX spot gold resistance at $1870 per ounce and support at $1780 per ounce. At MCX, Gold June 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 $22.10 per ounce with support at $21 per ounce. MCX Silver July has important resistance at Rs. 63000 per KG and support at Rs. 59800 per KG.

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

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