Gold prices fell on Monday as the strength of the greenback weighed on the prospects of the yellow metal. The Dollar Index (DXY) breached the 103 mark and was up 0.5% amid the statements made by top US Federal Reserve’s officials expressing concern over the credit conditions and economic headwinds. As the movement in DXY is inversely related to the price movement in bullion, the performance of gold will depend upon how the dollar moves.
The June gold futures were trading at Rs 59,314 per 10 grams at 11:50 am and were down by Rs 300 or 0.50%. May Silver futures were trading at Rs 71,628 per kg, down by Rs 590 or 0.82% around this time.
Gold was trading at $1,969.90 per troy ounce and was down by $16.30 or 0.82% on Comex while silver futures declined by $ 0.34 or 1.41% and were trading at $23.815.
“The weaker US dollar index increased demand for gold. However, as the banking crisis has subsided, solid buying interest has waned,” Prathamesh Mallya, Assistant Vice President – Research, Non-Agri Commodities, and Currencies, Angel One said.
We expect gold to trade lower towards Rs 59,070 levels, a break of which could prompt the price to move lower to Rs 58,680 levels, Mallya said.
“This week, bullion prices ended the quarter and month on a higher note, as expectations that the Fed will consider a rate-hike pause in the aftermath of the failure of two US regional banks,” Mallya said, adding that the markets anticipate that the Fed will leave interest rates unchanged in May.
“In the domestic market, gold prices rallied more than 15% in the last financial year and made a new lifetime high of Rs 60,000 level. Gold prices regained the safe-haven appeal in turbulent times after a dismal performance in the year FY 2021-22,” Deveya Gaglani, Research Analyst – Commodities, Axis Securities said.“Prices rallied majorly due to recessionary concerns and a possible rate cut by the Federal reserve by the end of this year, which dented the dollar index. The dollar index is down by more than 10% in the last six months,” he added.
On a year-to-date basis, gold futures have gained 8% on the MCX while the March gains were 6.40% according to commodity expert Anuj Gupta. Meanwhile, Silver futures have risen by over 4% this year and nearly 12% in March, he added.
Triggers & Outlook
“This week important data will be released that may impact Gold prices. Investors will be awaiting ISM Manufacturing PMI, ISM Services PMI, ADP Non-Farm Employment Change, and Non-Farm Employment Change,” Gaglani said.
“Market now awaits for the RBI MPC meeting outcome on 6th where RBI is expected to raise rates by 25 bps to keep a check on inflation and the NFPR from US on 7th,” Anil Kumar Bhansali, Head of Treasury at Finrex Treasury Advisors LLP said.
A strength in DXY will hurt the import as Dollar-priced commodities become expensive to the holders of other currencies. The movement of the rupee will be tracked by the street.
“The FEX reserves rose to nearly $579 billion bringing two weeks of back-to-back gains after falling to nearly $ 560 billion about 2 weeks ago,” Bhansali said.
Gold will face resistance around the $2000 level while the support is placed around the $1935 level, Gaglani of Axis Securities said.
Intraday trading strategy by Anuj Gupta
Buy MCX June Gold futures at Rs 59,500 with a stop loss of Rs 59,250 and price target of Rs 60,100.
Buy MCX May Silver futures at Rs 71,500 with a stop loss of Rs 71,000 and price target of Rs 72,800.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)