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Thursday, May 6, 2021

Gold eases further, slips below Rs 47,900/10 grams: Time to buy?

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Domestic gold and silver futures slumped on Thursday amid a rebound on Dalal Street as the yellow metal receded from a two-month peak overseas ahead of a policy rate decision by the European Central Bank.

Weakness in the dollar, which makes precious metals more attractive for those dealing in other currencies, provided some support to prices, say analysts.

MCX gold futures (delivery on June 4) declined by Rs 368 or 0.76 per cent to Rs 47,860 per 10 grams, having moved within a range of less than Rs 450 earlier on Thursday.

The August contract declined by Rs 404 or 0.83 per cent to Rs 48,100 per 10 grams.

MCX silver came down by Rs 638 or 0.91 per cent to Rs 69,700 per kilogram.

The benchmark 10-year US Treasury yield remained below the 1.6 per cent level. Low yields bring down the opportunity cost of holding non-yielding bullion.

In the international market, spot gold was 0.28 per cent lower at $1,788 per ounce at the last count, after quoting in a $14 range during the day as against its previous close of $1,793.10. Spot silver was down 0.38 per cent at $26.47 per ounce at the time.

Back home, gold and silver of 99.9 per cent purity stood at Rs 47,864 per 10 grams and Rs 69,966 per kilogram in the spot market, respectively, according to Mumbai-based India Bullion and Jewellers Association (IBJA), an industry body. Both prices exclude GST.

Meanwhile, the rupee depreciated by 6 paise to close at 74.94 against the dollar. The dollar index — which gauges strength in the greenback against six peers — quoted 0.05 per cent lower at 91.08 at the time.

Gold remains strong fundamentally, supported by weakness in the dollar and easing bond yields. Concerns on the pandemic front with record surgest in infections are also boosting the metal’s safe-haven appeal, according to analysts.

“A bipartisan US congressional push to counteract China picked up steam as a Senate committee overwhelmingly backed a bill pressing Beijing on human rights and economic competition introducing a measure seeking billions for technology research,” said Navneet Damani, VP-Commodities Research, Motilal Oswal Financial Services.

Damani expects a broader range of $1,780-1,805 per ounce on COMEX gold (Rs 47,900-48,310 per 10 grams in domestic rates) in the near term.

Trading ideas

Are commodities in a super cycle, and if so, are they poised to stay there for some time? While uncertainty surrounding the coronavirus pandemic has boosted bullion rates in the recent past, many other commodities — from base metals to energy to agri packs — are seeing late double-digit returns in the past one year. At this juncture, which pockets are promising bang for one’s buck in the next few weeks?

Here are 12 commodity picks that analysts believe can fetch returns to the tune of 16% in the near term.

Technical view

MCX gold (June) is facing crucial resistance around Rs 48,700 while support is placed at Rs 47,400, said Manoj Kumar Jain, Director-Head of Commodity Research, Prithvi Finmart.

“Technically, we suggest buying gold on dips around Rs 47,600 with a stop loss at Rs 47,280 for a target of Rs 48,600. The view is for the next 1-2 weeks,” he added.

Market participants will closely monitor the ECB announcements due later in the day and the outcome of the Federal Reserve’s policy meeting slated for the next week.

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