By Tapan Patel
Commodity prices traded mixed with bullion prices traded higher on weaker dollar post US FOMC. Crude oil prices ended in red witnessing selling on demand uncertainty over omicron worries. Base metals complex witnessed buying from lower levels on supply disruption from Peru and China liquidity assurance. Gold prices traded higher with spot gold prices at COMEX rose by 0.86% to $1798 per ounce for the week. Gold February futures at MCX gained by 0.89% at Rs. 48594 per 10 gram supported by rupee depreciation. The spot rupee ended 0.40% lower at 76.09 against the dollar for the week. Gold ETF holdings witnessed outflows as holdings at SPDR Gold Shares fell to 979 tonnes from previous week’s 983 tonnes. The CFTC data showed that money managers decreased their net long positions by 17932 lots in last week.
Silver prices traded up with spot silver prices at COMEX rose by 0.78% at $22.37 per ounce for the week. MCX Silver March futures rallied by 1.61% to Rs. 62137 per KG for the week. Silver prices outperformed gold with strong rebound following rise in industrial metals. The CFTC data showed that money managers decreased their net long positions by 8291 lots in last week. Bullion prices traded up reporting the first weekly gain since mid-November. Gold prices regained momentum post US FOMC meeting crossing the psychological level of $1800 per ounce. The hawkish stance from major central banks with higher inflation boosted risk premium in precious metals. The US inflation numbers are still near 40 years high while Europe and UK are facing record energy costs. The US FED decided to fasten the pace of tapering, while projecting three rate hikes in 2022.
The Bank of England unexpectedly raised interest rates on Thursday for the first time in three years, despite of concerns over the coronavirus to tackle the highest inflation in more than a decade. The dollar index declined by 0.49% to 96.57 while US 10 year bond yields fell to 1.40% boosting buying in precious metals. The upcoming US inflation data and job numbers will be crucial to watch to gauge the further trend in bullion prices.
We expect gold prices to trade sideways to up in 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. 49000 per 10 grams and support at Rs. 48000 per 10 gram. COMEX Spot silver has near term resistance at $23.20 per ounce with support at $21 per ounce. MCX Silver March has important resistance at Rs. 63500 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.)