Gold 3% shy of entering bear market as price tanks to Rs 46,644/10 gm, silver plunges by Rs 1,376


Gold prices tumbled by Rs 763 to Rs 46,644 per 10 gram in the Mumbai retail market, tracking sharp sell-off on February 16 on rising Treasury yield and firm dollar. The yellow metal traded lower on reduced safe-haven demand ahead of FOMC minutes, which is slated to be released later in the day.

The rate of 10 gram 22-carat gold in Mumbai was Rs 42,726 plus 3 percent GST, while 24-carat 10 gram was Rs 46,644 plus GST. The 18-carat gold quoted at Rs 34,983 plus GST in the retail market.

The bullion metal has declined Rs 3,479 or 6.94 percent in 2021 and down Rs 9,547 or 16.99 percent from the lifetime high of Rs 56,191 in August. It is just 3 percent away from entering into bearish territory. A fall of 20 percent or more from recent high is called bear market. 

The 10 US treasury yields receded slightly to 1.29 percent after spiking to 1.3 percent on February 16, the highest level since February 2020.

The rising yield dented bullion appeal it increases the opportunity cost of holding yellow metal.

The US dollar surged to 90.84, or 0.38 percent against a basket of six currencies, the highest level since February 9.

Gold holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, dropped 5.54 tonnes to 1,136.68 tonnes on increased ETF outflow.

Spot gold was down $ 4.50 to $ 1,790.59 an ounce at 12:19 GMT in London trading.

MCX Bulldesk edged down 72 points or 0.48 percent, at 14,885 at 17:48. The index tracks the real-time performance of MCX Gold and MCX Silver futures.

Navneet Damani, Vice President at Motilal Oswal Financial Services (MOFSL) said, “Gold prices languished to their lowest in nearly two weeks as the dollar firmed and US Treasury yields rose. Benchmark US Treasury yields gained more than 1.3% to their highest since February 2020. On the other hand, global shares were mixed, as investors juggle the prospects for an economic comeback and additional stimulus with continued pandemic concerns. Fed officials also commented yesterday, giving out a positive outlook for the economy, adding the weight on bullion.” 

On the brighter side, Fauci mentioned that the timeline for vaccination will probably be prolonged amidst some short-term delays, hence capping some losses for metal. Investors look forward to the minutes of the Federal Reserve’s end-January monetary policy meeting due later in the day. 

The broader range on COMEX could be between $ 1775- 1810 and on the domestic front, prices could hover in the range of Rs 46,450- Rs 47,100.

“COMEX gold trades lower near $ 1786/oz pressurized by a recovery in US dollar index from 3-week low, surge in US 10-year bond yield to Feb.2020 high, continuing ETF outflows and sharp correction in platinum price. Gold may remain under pressure unless price rescales $ 1800/oz level or we see a sharp correction in US bond yields. However, it needs to sustain below $ 1780 to fall further”, Ravindra Rao, VP- Head Commodity Research at Kotak Securities.

The gold/silver ratio currently stands at 68.16 to 1, which means the number of silver ounces required to buy one ounce of gold.

Silver prices tanked by Rs 1,376 to Rs 68,428 per kg from its closing on February 16. 

In the futures market, the gold rate touched an intraday high of Rs 46,800 and an intraday low of Rs 46,459 on the Multi-Commodity Exchange (MCX). For the April series, the yellow metal touched a low of Rs 46,459 and a high of Rs 51,931.

Gold futures for April delivery fell Rs 248, or 0.53 percent, to Rs 46,651 per 10 gram in evening trade on a business turnover of 13,553 lots. The same for June declined Rs 251, or 0.53 percent, at Rs 46,810 on a business turnover of 1,860 lots.

The value of the April and June’s contracts traded so far is Rs 2,537.87 crore and Rs 30.39 crore, respectively.

Similarly, Gold Mini contract for March slid by Rs 251, or 0.54 percent to Rs 46,526 on a business turnover of 21,760 lots.

Trading Strategy

Tapan Patel, Senior Analyst (Commodities), HDFC Securities

Gold prices witnessed selloff with the rise in bond yields as vaccine rollouts effect boosted economic growth optimisms. The dollar index was trading around 0.27% higher in noon session. The risk on sentiments drove investors out of precious metals. The ETF gold holdings at SPDR gold share fell to 1136.68 tonnes from 1142 tonnes.

We expect gold prices to trade lower with COMEX spot gold support lies at $ 1,760 and resistance at $ 1,800. MCX Gold April support lies at Rs 46,200 and resistance lies at Rs 46,800.

Kshitij Purohit, Product Manager, Currency & Commodities, CapitalVia Global Research Limited

International Gold holds support near $ 1,780-$ 1,775 levels, below which bearish momentum is likely to continue with resistance at $ 1,810-$ 1,820 levels. The global economic recovery has strengthened the bear move.

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