Gold futures test Rs 48,300/10 gm, silver Rs 71,000/kg. Time to take positions?

Domestic gold and silver prices declined on Friday amid a rise in the dollar and US bond yields. A record high on Dalal Street also dented the safe-haven appeal of bullion.

MCX nearby-month futures (June 4) were last seen quoting at Rs 48,380 per 10 grams in early deals in the evening session, Rs 201 or 0.41 per cent lower on the day. The contract had moved within a narrow range, between Rs 48,270 and Rs 48,497, earlier during the day, compared with its previous close of Rs 48,581 per 10 grams.

MCX silver futures for July 5 delivery traded down Rs 664 or 0.93 per cent on the day at Rs 71,055 per kilogram, after slumping as much as 1.05 per cent to Rs 70,967 during the session as against their previous close of Rs 71,719.

Both contracts traded with a negative bias following a gap-down opening.

In the spot market, spot gold of 22-carat purity declined by Rs 205 to Rs 47,910 per 10 grams in Delhi. Silver appreciated by Rs 61 to Rs 70,521 per kilogram in the national capital.

Globally, spot gold (Comex) traded 0.30 per cent lower at $1,890.89 per ounce and silver 0.79 per cent at $27.63 per ounce, having declined to as low as $1,888.01 and $27.59 earlier on Friday, respectively.

Analysts say a strengthening greenback amid optimism on recovery from the pandemic-caused slowdown in the world’s largest economy weighed on bullion rates.

“Mixed economic data and comments from Federal Reserve officials and Treasury Secretary Janet Yellen made market participants cautious… On one hand, jobless claims were positive, on the other, GDP and housing numbers were below expectations,” said Navneet Damani, VP-Commodities Research, Motilal Oswal Financial Services.

Data showing a better-than-expected drop in new jobless claims in the US last week reinforced hopes of a fast recovery, hurting the allure of the yellow metal as a safety bet. Separate data showed a preliminary quarterly US GDP reading missed analysts’ expectations, providing some support.

“Dallas Fed President Robert Kaplan said the labour market was tighter than levels of employment suggested and on the other hand, Yellen boosted market optimism about US economic growth, and downplayed the risk of rising inflationary expectations,” added Damani.

The rupee appreciated for the third day in a row to end at 72.45 against the dollar amid a jump in domestic shares, which also put pressure on precious metals.

The dollar index – which gauges the greenback against six major peers – traded 0.32 per cent higher at 90.25. Gains in the US currency make bullion less attractive for those holding other currencies.

On Dalal Street, the 50-scrip NSE Nifty50 benchmark extended a rally to the sixth session in a row to a record 15,435.65, rising 97.80 points or 0.64 per cent from its previous close. The leaner 30-scrip S&P BSE Sensex index rose 307.66 points or 0.60 per cent to close at 51,422.88, having come within a 1,000-point reach of its all-time high, hit on February 16, during the session.

Typically, gains in equities boost the risk appetite of investors, moving them away from safe-haven assets such as bullion.

Where are the precious metals headed?

Damani expects the yellow metal on Comex to trade in a range of $1,875-1,910, and on MCX to move between Rs 48,350 and Rs 48,900, in the near term.

According to Manoj Kumar Jain, Director-Head of Commodity Research, Prithvi Finmart, MCX gold has support at Rs 48,350-48,180 and resistance at Rs 48,800-49,050. Silver is expected to meet resistance at Rs 72,400-73,000 and support at Rs 71,200-70,700, he said.

Analysts expect both precious metals to remain volatile ahead of key US data. Market participants will closely watch US personal consumption data due later in the day for clues on inflation and monetary policy going forward.

Jain suggests buying MCX gold around Rs 48,500 for a target of Rs 49,000 with a stop loss at Rs 48,180, and silver around Rs 71,300 for a target of Rs 73,000 with a stop loss at Rs 70,700.

Gold may face resistance at Rs 48,500 and silver, which is trading above support at Rs 70,600-71,200, may test Rs 71,500-71,800 in the evening session, said Kshitij Purohit, Lead Commodities and Currency, CapitalVia Global Research.