NEW DELHI: Gold prices on Wednesday declined from a near five-month high after US manufacturing activities expanded boosting investment confidence into the riskier assets. A stronger US dollar added pressure on the gold prices. Domestic markets followed the global trends and precious metals declined.
Data showed that US manufacturing activity picked up in May as pent-up demand in a reopening economy boosted orders, but shortages of raw materials and labour remained a concern. Market participants’ are focusing on US payrolls data due later this week for further clarity on economic recovery.
The US 10-year treasury yield rose to more than the one-week high mark overnight, weighing on the safe-haven metal and increasing the opportunity cost of holding non-interest bearing gold.
Risk sentiment in wider financial markets remained upbeat as investors weighed the latest US economic data for signs of a rebound and higher inflation reading. Gold, often used as a hedge against inflation, is supported by rising prices.
Physical gold demand in India, the second-biggest bullion consumer, has dampened. ETF inflows indicated some buying interest from investors. However, this is countered by a weaker consumer demand in India owing to virus related restrictions.
Gold futures on MCX shed 0.12 per cent or Rs 61 at Rs 49,364 per 10 grams. Silver futures slipped by 0.55 per cent or Rs 398 to Rs 71,850 per kg.
“COMEX gold trades in a narrow range near $1900/oz after a near flat close in the previous session. Gold is choppy near $1900/oz reflecting volatility in US dollar and equity market as market players assess monetary policy amid economic growth and rising inflation pressure,” Ravindra Rao, CMT, EPAT, VP-Head Commodity Research, Kotak Securities.
In the spot market, highest purity gold was sold at Rs 49,319 while silver was priced at Rs 72,413 on Tuesday, according to the Indian Bullion and Jewellers Association.
“Gold may witness choppy trade along with US dollar and equity market. However, general bias may be on the upside until US dollar recovers significantly”
Trading strategy
“We expect gold prices to trade sideways to down for the day with COMEX Spot gold support at $1880 and resistance at $1920 per ounce. MCX Gold June futures support lies at Rs 49,200 and resistance at Rs 49,800 per 10 gram,” said Tapan Patel, Senior Analyst (Commodities), HDFC Securities.
Global markets
Spot gold was down 0.1 per cent at $1,898.58 per ounce, as of 0053 GMT, after hitting its highest since Jan 8 at $1,916.40 on Tuesday. US gold futures eased 0.2 per cent to $1,901.90 per ounce.
Palladium fell 0.1 per cent to $2,856.82 per ounce, silver edged 0.1 per cent lower to $27.88, and platinum was steady at $1,191.51.