Gold futures snap 3-day losing streak ahead of Fed policy outcome

News

Domestic gold rates moved higher on Wednesday as equities retreated from record levels ahead of the release of the US central bank’s policy statement following a two-day meeting. Market participants keenly watched out for any signs of early tapering of stimulus in the world’s largest economy.

MCX gold futures rose by Rs 140 to Rs 48,564 per 10 grams at the strongest level of the day. The August 5 contract quoted at Rs 48,460 per 10 grams, up 0.07 per cent or Rs 36 for the day, in the final hours of the morning session.

MCX silver futures for July 5 delivery climbed to as high as Rs 71,689 per kilogram, and were last seen trading at Rs 71,540, up 0.41 per cent or Rs 292.

Weakness in the dollar overseas boosted gold’s appeal for holders of other currencies. Technically, gold futures may test lower levels near Rs 48,200 per 10 grams later in the day, say analysts.

Analysts awaited the upcoming policy statement from the US central bank and economic projections to assess the timing of monetary tightening in the future.

“Gold has turned rangebound as market players position themselves for the Fed decision. The yellow metal has already corrected on expectations that the Fed may hint towards monetary tightening and further movement may come from the actual stance of the central bank,” said Ravindra Rao, CMT, EPAT, VP- Head Commodity Research at Kotak Securities.

“Gold is expected to trade sideways to up for the day. Support for Comex gold is expected at $1,850 and resistance at $1,880 per ounce.”

— Tapan Patel, HDFC Securities

In the international market, spot gold was last seen trading 0.18 per cent lower at $1,855.47 per ounce, having moved between $1,853.29 and $1,861.48 earlier on Wednesday. Spot silver, however, was up 0.25 per cent at $27.72 per ounce.

Fed officials have already said rising inflationary pressures are transitory and easy money policy would continue for some time.

“Speculation on scaling back of stimulus has kept bullion prices lower. The Fed may signal to start discussions on any plan to unwind its asset purchase program,” said Tapan Patel, Senior Analyst (Commodities), HDFC Securities.

Back home, gold declined by Rs 48 to Rs 47,814 per 10 grams in New Delhi, but silver rose by Rs 340 to Rs 70,589 per kg.

On Dalal Street, equities made a U-turn to put an end to a winning streak that lasted for four consecutive sessions, amid some nervousness among investors ahead of the key US event especially about the timing of tapering its record bond buying program.

The S&P BSE Sensex index shed 271.07 points or 0.51 per cent to end at 52,501.98 and the border NSE Nifty50 benchmark shed 101.70 points or 0.64 per cent to settle at 15,767.55. Both indices had risen around 1.5 per cent in the past four sessions to scale a series of record highs.

The rupee declined marginally to end at 73.32 against the dollar, after moving between 73.26 and 73.38 in intraday trade. The dollar index – which gauges the greenback against six peers – was flat at 90.50 at the last count, having declined as much as 0.10 per cent to 90.41 earlier.

Technical outlook

“MCX gold futures have already declined by over Rs 500 in the past one week. We may witness bearish momentum in the evening session where Rs 48,300-48,200 levels may be tested,” said Kshitij Purohit, Product Manager, Currency & Commodities, CapitalVia Global Research. He expects support for silver futures at Rs 71,200-70,900.

MCX gold August futures are expected to find support at Rs 48,100 and meet resistance at Rs 48,800, said Patel of HDFC Securities.

How to trade precious metals

Manoj Kumar Jain, Director-Head of Commodity Research, Prithvi Finmart, suggests buying MCX gold futures on dips around Rs 48,200 for a target of Rs 48,660 with a stop loss at Rs 47,950. In silver, a long position can be taken around Rs 70,700 for a target of Rs 71,800 with a stop loss at Rs 70,200, he added.

Articles You May Like

NZD/USD conquers 0.6400 amidst a risk-off mood, post US NFP report
Gold rate today: Yellow metal ticks higher, silver marches towards Rs 66,000
Gold rate today: Yellow metal eases after a run-up; silver tops Rs 65,000 on MCX
Dollar Selloff Continues as China Eases Restrictions, RBA and BoC To Hike This Week
USD/JPY Price Analysis: Stumbles below 134.00 and the 200-DMA on soft USD