Silver futures drop below Rs 71,900/kg, gold edges lower. Time to take positions?

Domestic gold and silver prices declined on Friday amid a sharp bounceback on Dalal Street, though weakness in the dollar overseas limited the downside.

MCX gold futures for June 4 delivery traded lower throughout the morning session, and were last seen quoting down by Rs 95 or 0.20 per cent at Rs 48,449 per 10 grams. The contract moved between Rs 48,336 and Rs 48,538 as against its previous close of Rs 48,544.

MCX silver futures for July 5 delivery were down 0.59 per cent (Rs 425) at Rs 71,879 per kilogram at the time, having declined to as low as Rs 71,544 earlier.

In the international spot market, benchmark Comex gold quoted marginally higher at $1,878.05 per ounce, and was headed for a third weekly gain in a row, amid receding concerns about quicker-than-expected tapering of stimulus in the US. Silver edged lower higher at $27.73 per ounce.

Optimism around a fast global recovery and receding concerns about early withdrawal of loose monetary policy in the US boosted the appeal of riskier assets, say analysts.

“Market participants realised that the Federal Reserve may take months to taper bond buying and increase interest rates until the US economy comes fully on track,” said Manoj Kumar Jain, Director-Head of Commodity Research, Prithvi Finmart.

However, concerns around the still-spreading coronavirus pandemic provided some support to bullion.

Also, the dollar index – which gauges the US currency against six major peers – was last seen down 0.03 per cent at 89.77, having slid to as low as 89.64 earlier in the day. Weakness in the dollar makes bullion more attractive for those holding other currencies.

Back home, the rupee appreciated by 29 paise to end at 72.83 against the greenback.

Spot gold (22 carat) became dearer by Rs 119 to settle at Rs 47,995 per 10 grams in the national capital. However, silver declined by Rs 258 to Rs 70,998 per kilogram.

Dalal Street rebounded sharply following two days of retreat amid strong buying interest in financial and IT stocks. The S&P BSE Sensex index surged 1.97 per cent to close at 50,540.48 and the broader NSE Nifty 50 benchmark 1.81 per cent to 15,175.30.

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Typically, gains in equities boost investors’ risk appetite, denting the safe-haven allure of precious metals.

Analysts say forex fluctuations can cause some volatility in precious metals in the near term.

Technical view

Navneet Damani, VP-Commodities Research, Motilal Oswal Financial Services, expects MCX gold to move between Rs 48,250 and Rs 48,850 per 10 grams in the near term.

“If the MCX gold June futures are unable to move past the immediate resistance of Rs 49,600, there are chances of corrective selling pressure. Major support is placed at Rs 46,920,” said Hareesh V, Head of Commodity Research at Geojit Financial Services.

The MCX June contract has support at Rs 48,330-48,180 and resistance at Rs 48,770-48,920, said Jain. For silver, he sees support at Rs 71,700-71,400 and resistance at Rs 72,700-73,200 per kg.

He suggests buying MCX gold around Rs 48,250 for a target of Rs 48,770 with a stop loss at Rs 48,000.

MCX gold June prices are sustaining above the 50-day simple moving average and expected to rise in the evening session, said Kshitij Purohit, Product Manager, Currency & Commodities, CapitalVia Global Research. For silver, he sees resistance at Rs 72,350-72,700, which could be tested in the session ahead.

Market participants will closely monitor data on manufacturing and services activity in the US due later in the day for more clues on strength in the world’s largest economy.