Gold futures plummet, hover near Rs 47,000/10 gm. Time to take positions now?

NEW DELHI: Domestic gold futures tanked by more than Rs 1,600 on Thursday mirroring losses in global benchmarks, as the dollar and US bond yields surged after the US central bank’s projection of earlier-than-expected rate hikes. The August 5 contract of the yellow metal on MCX fell as much as 3.38 per cent or Rs 1,639 to Rs 46,867 during the evening session before regaining the Rs 47,000 level, which analysts see as near-term support.

Silver followed suit, plummeting by as much as Rs 3,568 or 4.99 per cent to Rs 67,900 per kilogram.

At 7:48 pm, MCX gold futures (August 5) traded 3.09 per cent lower at Rs 47,008 per 10 grams while silver futures (July 5) were down 4.48 per cent at Rs 68,264 per kilogram.

Analysts said the surge in the US currency and yields in reaction to the Federal Reserve’s projection of earlier interest rate increases put pressure on bullion rates.

“The Fed’s stance is negative for gold. However, the market reaction may subside as the US central bank is not looking at any imminent measures,” said Ravindra Rao, CMT, EPAT, VP- Head Commodity Research at Kotak Securities.

In the international markets, spot gold hit a six-week low of $1,775.15 per ounce, and was last seen trading down 1.376 per cent at $1,779.80 per ounce. Silver was down 3.39 per cent at $26.09 per ounce.

Back home, spot gold dropped by Rs 861 to Rs 46,863 per 10 grams in New Delhi. The white metal slumped by Rs 1,709 to Rs 68,798 per kg.

Technically, analysts expect support for gold at Rs 47,000 per 10 grams and for silver at Rs 67,200 per kg.

A majority of Fed officials projected at least two quarter-point rate rises for 2023. However, the US central bank pledged to keep policy supportive for now to encourage a jobs recovery.

“The hawkish stance pushed the dollar higher against major currencies, triggering selling in gold prices. The stronger dollar may continue to put pressure on the yellow metal, dampening its safe-haven appeal in the short term,” said Tapan Patel, Senior Analyst (Commodities) at HDFC Securities.

Higher interest rates tend to affect gold’s appeal as a safe-haven asset as they increase the opportunity cost of holding bullion.

The rupee depreciated by 76 paise against the dollar to settle at the weakest level of the day at 74.08. The dollar index — which gauges the greenback against six major currencies — was up 0.60 per cent at 91.757, having risen to as high as 91.832 earlier on Thursday.

Technical outlook
Patel of HDFC Securities said he expects gold to move sideways to down for the day with support for MCX gold expected at Rs 47,200 and resistance at Rs 47,800 per 10 grams.

Kshitij Purohit, Product Manager, Currency & Commodities at CapitalVia Global Research, pegged support for MCX gold at Rs 47,000 and then Rs 46,800 for the evening session. For silver, he expected support at Rs 68,200, followed by Rs 67,600 and Rs 67,100.

Should you take positions?
Gold can be sold on rises around Rs 47,550 for a target of Rs 46,770 with a stop loss at Rs 47,880, and silver around Rs 68,800 for a target of Rs 67,500 with a stop loss at Rs 69,500, said Manoj Kumar Jain, Director-Head of Commodity Research at Prithvi Finmart.

Ajay Kedia, Founder and Director, Kedia Advisory, said traders should wait before taking fresh long positions. He recommends selling the yellow metal contract at Rs 47,400 for a target of Rs 46,800 over the next one week with a stop loss at Rs 47,800.