Gold prices give a breakout above 200-day SMA, rise above Rs 48,000/gm; Silver up Rs 1,375 a kg


Gold prices jumped by Rs 389 to trade above Rs 48,000 per 10 gram in the Mumbai retail market on inflation concerns and weak economic data from the US and China. The precious metal gave a breakout and traded above the 200-day simple moving average and supported by a dip in Treasury yield and dollar.

The rate of 10 gram 22-carat gold in Mumbai was Rs 44,102 plus 3 percent GST, while 24-carat 10 gram was Rs 48,146 plus GST. The 18-carat gold quoted at Rs 36,110 plus GST in the retail market.

US CFTC data showed gold speculators raised their net long positions by 29,451 contracts to 95,585 in the week to May 11.

The US Commerce Department said April retail sales unexpectedly stalled as the boost from stimulus checks faded and also lent support to gold. The weak US data helped to ease fears of out of control inflation and bets that the US Federal Reserve would raise rates faster than anticipated.

RBI’s latest tranche of the Sovereign Gold Bond (SGB) is starting from today for five days. Issue price for SGB Scheme 2021-22 is fixed at Rs 4,777 per gram, and a discount of Rs 50 per gram, less than the nominal value has been decided for the investors applying online. 

The US dollar eased to 90.29 or down 0.02 percent against a basket of six rival currencies. 

Gold holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, was unchanged at 1,028.36 tonnes. 

Spot gold was higher by $ 4.84 to $ 1,848.11 an ounce at 12:06 GMT in London trading.

MCX Bulldesk climbed 121 points or 0.81 percent, at 15,100 at 17:37. The index tracks the real-time performance of MCX Gold and MCX Silver futures.

“Gold prices continue to trade higher hovering near to around three-month highs, as a weaker dollar and a dip in U.S. yields on the back of weak U.S. economic data reported last week boosted metal’s appeal. Dollar index fell to almost one week low: whereas U.S. 10-year Treasury yields retreated further from a more than one-month high hit last week. Weak data from the U.S. gave further support to the metal prices, as retail sales and industrial production numbers missed the expectations in April”, Navneet Damani, VP – Commodities Research, Motilal Oswal Financial Services. 

“Also, fear of rising inflation is weighing on consumer sentiment, adding to concerns about how quickly the US economy will be able to recover from the pandemic, and pushing away any noise about the changes in interest rate. The economic calendar is muted for the day, although market participants will keep an eye on the FOMC minutes and preliminary Manufacturing and services PMI data expected from major economies, scheduled later in the week”, he added. 

The broader range on COMEX could be between $ 1820- 1880 and on the domestic front prices could hover in the range of Rs 47,750- 48,300.”

The gold/silver ratio currently stands at 67.11 to 1, which means 67.11 ounces of silver is required to buy an ounce of gold.

Silver prices advanced by Rs 1,375 to Rs 71,735 per kg against its closing price on May 14.

Also read: Gold outlook: Precious metal on verge of big breakout; price heads toward Rs 50,000 per 10 gm

In the futures market, the gold rate touched an intraday high of Rs 48,070 and an intraday low of Rs 47,910 on the Multi-Commodity Exchange (MCX). For the June series, the yellow metal touched a low of Rs 44,108 and a high of Rs 51,924.

Gold futures for June delivery soared Rs 306, or 0.64 percent, to Rs 47,982 per 10 gram in evening trade on a business turnover of 6,942 lots. The same for August rose Rs 332, or 0.69 percent, at Rs 48,490 on a business turnover of 7,516 lots.

The value of June and August’s contracts traded so far is Rs 1,763.58 crore and Rs 648.28 crore, respectively.

Similarly, Gold Mini contract for June edged higher by Rs 305, or 0.64 percent at Rs 47,987 on a business turnover of 13,365 lots.

Trading Strategy

Tapan Patel, Senior Analyst (Commodities), HDFC Securities

We expect gold prices to trade sideways to up for the day with COMEX gold support at $ 1,840 and resistance at $ 1,860 per ounce. MCX Gold June support lies at Rs 47,800 and resistance at Rs. 48,400 per 10 gram.

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

International gold is trading with marginal sideways to positive bias after breaching the resistance of $ 1,838-1,846 levels. Psychological levels of $ 1,850 were also breached but the market is unable to sustain above them as of now. On the MCX, gold is trading in the resistance zone of Rs 47,900-48,150. We expect a dip in prices, where Rs 47,800 levels could be tested on the downside. This dip could act as a buying opportunity for the investors.

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