Gold likely to trade sideways to up, MCX Silver support placed at Rs 60,200; key factors to watch this week

By Tapan Patel

Commodity prices traded higher with most of the commodities in the non-agro segment witnessing buying during last week. Bullion prices rose on inflation worries and fall in bond yields while crude oil prices rallied by more than 4% on lower supply despite Omicron restrictions. Base metals complex traded higher on strong demand and lower supply along with weaker dollar.

Gold prices traded higher with spot gold prices at COMEX rose by more than 1% to $1817 per ounce for the week. Gold February futures at MCX ended 0.98% lower at Rs 48119 per 10 gram pressured by rupee appreciation. The spot rupee fell by 1.40% at 75.02 against the dollar for the week. Gold ETF holdings witnessed outflows as holdings at SPDR Gold shares fell to 974 tonnes from previous week’s 979 tonnes.

Silver prices traded higher with spot silver prices at COMEX rose by 2.91% at $23.02 per ounce for the week. MCX Silver March futures gained by 0.26% to Rs. 62298 per KG for the week. Silver prices outperformed gold with rebound in industrial metals amid higher demand and lower supply scenario.

Bullion prices traded up for the second week with gold prices closing at five week highs. Bullion prices traded higher on global inflation worries and weaker dollar despite hawkish US Fed stance and faster Fed tapering. The precious metals prices added risk premium over fast spreading Omicron virus infections across the globe. Many countries have imposed lockdown restrictions to curb virus cases which raised economic growth concerns. The higher US inflation is still a supporting factor for gold and silver bulls as the data showed the US Consumer Price Index, or CPI, rose 6.8 per cent in the year to November, growing at its fastest pace since 1982.

The dollar index declined by 0.57% to 96.02 while US 10 year bond yields fell to 1.48% boosting buying in precious metals. We expect gold prices to trade sideways to up in the coming week with COMEX spot gold resistance at $1833 per ounce and support at $1780 per ounce. At MCX, Gold February prices have near term resistance at Rs 48,700 per 10 grams and support at Rs 47,600 per 10 gram. COMEX Spot silver has near term resistance at $23.60 per ounce with support at $22.20 per ounce. MCX Silver March has important resistance at Rs. 63800 per kg and support at Rs. 60200 per kg.

(Tapan Patel is a Senior Analyst (Commodities) at HDFC Securities. Views expressed are the author’s own. Please consult your financial advisor before investing.)