Gold, silver rates jump for third week straight; expect bullion price to climb further

The precious metals rallied supported by the weaker dollar and fall in US bond yields while traders and investors continued their bets on rising inflation worries.
(Image: REUTERS)

By Tapan Patel

Commodity prices traded mixed during the week passed by with Bullion prices rallied on inflation hedge. Base metals complex continued downside as China signalled policy action to curb rising prices. Crude oil prices declined with progress in Iran nuclear talks adding supply pressure. 

Gold prices traded higher with spot gold prices at COMEX rose by 2% to $1881.25 per ounce for the week. Gold prices at MCX gained by 1.53% to Rs 48,404 per 10 gram as rupee appreciation capped upside during the week. The spot rupee rose by 0.62% against the dollar for the week. Gold ETF holdings witnessed inflows as holdings at SPDR Gold Shares rose to 1043 tonnes from the previous week’s 1028 tonnes. The CFTC data showed that money managers increased their net long positions by 11311 lots last week.

Silver prices ended in green with spot silver prices at COMEX closed half a per cent up at $27.56 per ounce for the week. MCX Silver May futures ended marginally down to Rs 71,049 per KG. Silver prices traded under pressure compare to gold following sell-off in industrial metals after China mulled policy action to cool down prices. The CFTC data showed that money managers decreased their net long positions by 1294 lots last week. 

Bullion prices traded higher with gold prices reported third weekly gain with prices facing strong resistance near $1900 per ounce. The precious metals rallied supported by the weaker dollar and fall in US bond yields while traders and investors continued their bets on rising inflation worries. The speculation over FED minutes and market talks of hawkish Fed stance capped upside in Gold while silver prices capped gains on weak base metals. Major central banks have warned of higher inflation which may lead to ease in stimulus packages. The White House, on Friday, said it had pared down its infrastructure bill to $1.7 trillion from $2.25 trillion. The dollar index ended 0.34% down at 90.02 mark while US 10 year treasury yields fell to 1.623% during the week. Bullion prices will get support from inflation hedge while liquidation in cryptocurrencies may attract investment into safe-haven assets.

We expect gold prices to trade up in the coming week with COMEX spot gold resistance at $1900 per ounce and support at $1860 per ounce. The break above $1900 may lead prices towards $1920 levels. At MCX, Gold June prices have near term resistance at Rs 48,900 per 10 grams and support at Rs 47,800 per 10 gram. COMEX silver spot has near term resistance at $28.30 per ounce with support at $26 per ounce. MCX Silver May has important resistance at Rs 73,800 per KG and support at Rs 68,800 per KG.

(Tapan Patel is a Senior Analyst (Commodities) at HDFC securities. The views expressed are the author’s own. Please consult your financial advisor before investing.)