Gold declined marginally during the week to settle at Rs 47,487 per 10 gram on a stronger rupee with foreign banks selling the dollar and buoyant equity markets. In the international market, the metal gained on weaker-than-expected US non-farm payroll data and a softer dollar.
The metal dropped in four of the five trading sessions on the MCX and ended the week with a loss of Rs 51. Comex gold, on the other hand, jumped $ 10.75 or 0.59 percent during the week.
“Gold prices traded near two-month highs rallying for the fourth consecutive week. Gold prices kept a firm trading range throughout the week as market players were awaiting key US job market data. The disappointing data from China and the weaker dollar continued to support gold prices for the week,” Tapan Patel, Senior Analyst (Commodities), HDFC Securities.
The metal has been trading higher than its 5, 20 and 50-day moving averages but lower than the 100 and 200-day moving averages on the daily chart. The momentum indicator Relative Strength Index (RSI) is at 53.19, which indicates a neutral movement in prices.
The non-farm payroll data for August showed that the US added 235,000 jobs against an expected 750,000 jobs. A weak data is likely to delay Federal Reserve’s monetary tightening, which supported the bullion.
The spot rupee rallied by 0.91 percent against the dollar.
The US dollar index rose 0.25 percent to close at 90.01 against the rival currencies, while 10-year US treasury yields fell to 1.623 percent during the week. The dollar index ended with a loss of 0.35 percent through the week and touched a low of 89.63.
Gold ETF holdings continued to decline as holdings at SPDR Gold Shares fell below 1,000 tonnes to 998.52 tonnes from the previous week’s 1,002 tonnes last week.
The CFTC data shows that money managers increased their net long positions by 4,273 lots during the week.
“Gold prices breached consolidation range above $ 1,810 per ounce after comments from the Fed chairman at the Jackson Hole Symposium. The US Labor Department reported on Friday that employers added 235,000 jobs in August, less than a third of the forecast 733,000”, Patel added.
Gold prices may trade higher on dovish Fed stance with pandemic worries and slower economic growth, he said.
Major central banks have warned of higher inflation, which may lead to ease in stimulus packages. The White House said on September 3 it had pared its infrastructure bill to $ 1.7 trillion from $ 2.25 trillion, he said.
“Gold prices will get support from inflation hedge, while liquidation in cryptocurrencies may attract investment into safe-haven assets,” Patel added.
The spot gold/silver ratio currently stands at 73.96 to 1, indicating that silver has outperformed gold.
Spot gold settled with a gain of $ 18.02 at $ 1,827.72 an ounce in London trading.
Gold futures for October delivery rose by Rs 496, or 1.06 percent, to Rs 47,487, with a business turnover of 10,178 lots. The same for the December contract jumped by Rs 471, or 1 percent, to Rs 47,610 on a business turnover of 4,262 lots.
Recommendation
Patel expects gold to trade sideways to up in the coming week, with Comex spot gold resistance at $ 1,850 and support at $ 1,800.
On MCX, October gold prices have near-term resistance at Rs 47,900 and support at Rs 46,900.
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