Gold rises 1% to Rs 49,190/10 gm, silver up 3% this week; key events, technicals and strategy

Source: Reuters

Source: Reuters

Gold prices edged lower to Rs 49,190 per 10 gram on January 22 as participants trimmed their position as seen by the open interest. However, the precious metal ended with a gain of Rs 488 or 1 percent for the week as Democrat Joe Biden was sworn-in as the 46th President of the United States and promoted COVID-stimulus plan. 

The yellow metal rose in three out of five trading sessions on the MCX while COMEX gold jumped $ 46.45 or 2.57 percent during the week.

The bullion metal price fell on January 22 as broader selloff across assets class, firm dollar and rising bond yields.

Biden’s inauguration speech and actions since taking office have convinced investors that there is a growing chance that Congress could approve at least a large part of his proposed $ 1.9 trillion stimulus bill to support the economy.

Gold also took support after the European Central Bank left its policy unchanged and initially hinted it could cut its bond-buying scheme. However, ECB President Christine Lagarde later stressed that the bank remains open to more if the need arises.

In the retail market, the bullion metal closed at Rs 49,140 per 10 gram on Friday, down 1.05 percent on rupee appreciation and muted global cues. The yellow metal eased Rs 187 or 0.38 percent during the week in the domestic market. The premium charged by a dealer over official domestic price flipped into a discount for first time in 2021 to $ 0.25 per troy ounce against a premium of $ 0.5 last week.

The rate of 10 gram 22-carat gold in Mumbai was Rs 45,012 plus 3 percent GST, while 24-carat 10 gram was Rs 49,140 plus GST. The 18-carat gold quoted at Rs 36,855 plus GST in the retail market.

“We are seeing good demand for gold jewellery and a rising trend in prices is prompting a surge in the booking of wedding jewellery”, Kumar Jain, Vice President Mumbai Jewellers Association told Moneycontrol. He sees the retail price of the yellow metal going up from Rs 52,000/10 gm to Rs 60,000 by around March-end or the first week of April.

The US dollar closed firm at 90.20 or 0.07 percent higher on Friday against a basket of six currencies. The greenback shed 0.61 percent during the week on reduced safe-haven appeal. 

Gold holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell by 0.87 tonnes to 1,173.25 tonnes.

MCX Bulldesk dropped 100 points, or 0.65 percent to end at 15,351. The index tracks the real-time performance of MCX Gold and MCX Silver futures.

Spot gold settled with a loss of $ 14.42 at $ 1,855.86 an ounce in London trading. The yellow metal has declined $ 40.63 or 2.14 percent in 2021.

Sriram Iyer, Senior Research Analyst at Reliance Securities, said, “Looking ahead to the next week, the only question in the mind of the investors will be whether the Republicans could fight against expenditure they dislike. However, if some form of stimulus is passed, bulls could push gold prices higher.”

“Additionally, for gold markets, the more and the sooner, the better. Any sign of bipartisan support could push the precious metal higher, while disagreement would weigh on it”, Iyer noted.

The spot gold/silver ratio currently stands at 72.78 to 1, which means the number of silver ounces required to buy one ounce of gold. The increase in ratio indicates that gold has outperformed silver.

Silver prices slumped Rs 576 or 0.86 percent to close at Rs 66,724 per kg on the MCX. The precious metal ended the week with a gain of Rs 1,960 or 3.03 percent in the domestic bourse.

In the futures market, the gold rate touched an intraday high of Rs 49,399 and an intraday low of Rs 48,685 on the Multi-Commodity Exchange (MCX). For the February series, the yellow metal touched a low of Rs 41,560 and a high of Rs 57,100.

Gold futures for February delivery slipped Rs 258, or 0.52 percent, to settle at Rs 49,190 per 10 gram with a business turnover of 5,011 lots. The same for April slid to Rs 268, or 0.54 percent, at Rs 49,328 on a business turnover of 10,666 lots.

The value of the February and April contracts traded on January 22 was Rs 5,711.11 crore and Rs 844.26 crore, respectively.

Similarly, Gold Mini contracts for February decreased by Rs 254, or 0.51 percent to shut at Rs 49,164 on a business volume of 12,286 lots.


Technically, LBMA Gold Spot had bounced back from its multiple support zone which is placed at $ 1,800-$ 1,820 levels and started to trade above 200-Daily Moving Average indicating a bullish trend to continue. Gold could trade in a range of $ 800-$ 1883 level with support placed at $ 1,835-$ 1,807 levels, whereas resistance is $ 1,864-$ 1,883 levels, said Iyer.

He added LBMA Silver Spot holds a strong support near $ 24.20-$ 24.90 levels where prices could bounce back and could trade on bullish momentum up to $ 26.75-$ 27.40 levels. Silver could trade in a range of $ 24.20-$ 27.40 in the coming week.

Iyer stated that MCX Gold is holding well above its 200-DMA support which is placed at Rs 48,555 levels above which could see an upside move up to Rs 50,200-51,000 levels. However, breakdown below Rs 48,500 could once again activate bearish trend where prices can fall further Rs 47,500-46,600 levels. It could trade in a range of Rs 48,250-50,300 levels in the coming week.

MCX Silver March holds a very strong support at Rs 64,200 level above which will continue its bullish rally up to Rs 67,700-69,800 levels. Support is at 64800-63700 levels, he said.

Next Week Strategy

Reliance Securities advises its clients to buy on dips Gold February Rs 48,500 with a stop loss at Rs 48,200 and for a target of Rs 49,500.

Strategy for Silver March: The brokerage firm advises buy near Rs 65,700-65,500 with a stop loss at Rs 64,500 and a target of Rs 69,800.

Events to watch out

Next week, markets will keenly await the FOMC meeting outcome. More accommodative talks from the Fed Chair Jerome Powell will continue to push prices higher.

The other top events on the economic calendar are US Durable Goods Orders for December and GDP. Signs of economic weakness may prompt lawmakers and the Fed to act. The consensus is for around 4.4 percent growth in the 4th quarter.

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