Domestic gold and silver prices remained under pressure on Wednesday amid a strengthening dollar and a rise in US bond yields, as key data that showed consumer prices logged a higher-than-expected jump in the world’s largest economy.
MCX gold futures for June 4 delivery recovered all of the day’s losses to trade marginally higher at Rs 47,640 per 10 grams in evening deals. Earlier in the day, the contract had declined by as much as Rs 168 from its previous close to Rs 47,465 in the morning session, which is conducted from 9 am to 5 pm on the bourse.
MCX silver (July 5) declined by Rs 469, or 0.65 per cent, to Rs 71,460 at the last count, having come down to as low as Rs 71,256 earlier in the day.
The US consumer price index jumped 0.8 per cent in April, as against a rise of 0.6 per cent in the previous month, according to the Labor Department. Excluding the volatile food and energy components, the CPI soared 0.9 per cent.
Analysts say the latest inflation reading could trigger some volatility in the market.
“US inflation is a huge surprise on the upside… A higher set of CPI readings for a few months could bring in a rate hike earlier than expected,” said Navneet Damani, VP-Commodities Research, Motilal Oswal Financial Services.
The dollar index – which measures the greenback against six other currencies – gained as much as 0.31 per cent to 90.40 for the day so far. Strength in the greenback makes bullion less attractive for those holding other currencies.
The yield on benchmark 10-year US bonds rose to as high as 1.64 per cent.
Comex spot gold traded 0.21 per cent lower at $1,833.61 per ounce while silver quoted 0.87 per cent lower for the day at $27.37 per ounce.
“A direct break of $1,845 is required to trigger further rallies. Else, there are chances of corrective selling, but a major downside reversal point is placed at $1,758.”
“Signs of global economic recovery and steady global equities assisted the trend. However, concerns over the second wave of Covid-19 infections may limit major weakness in the counter,” said Hareesh V, Head-Commodity Research at Geojit Financial Services, ahead of the release of US data.
Back home, spot gold (22 carat) became cheaper by Rs 229 to settle at Rs 47,074 per 10 grams in the national capital for the day. Silver followed suit, declining by Rs 717 to Rs 70,807 per kilogram.
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A second straight day of losses on Dalal Street as infections continued to soar provided some support to bullion rates, amid nervousness across investors in global markets over a potential acceleration in US inflation.
The S&P BSE Sensex index slumped 471.01 points or 0.96 per cent to end at 48,690.80 and the broader NSE Nifty50 benchmark settled at 14,696.50, shedding 154.25 points or 1.04 per cent from its previous close. With that, the 30-scrip gauge took its loss to 811.61 points or 1.64 per cent in two consecutive sessions.
Typically, losses in equities boost the safe-haven appeal of precious metals, and vice versa.
Damani expects Comex spot gold to move within a range of $1,810-1,855, and MCX gold between Rs 47,330 and Rs 47,880 per 10 grams, in the near term.
The nearby month contract at MCX has support at Rs 47,330-47,180 and resistance at Rs 47,800-48,055, said Jain. For silver, support is seen at Rs 71,400-70,900 and resistance at Rs 72,500-73,100 per kg.
He recommends buying MCX gold around Rs 47,500 for a target of Rs 48,000 with a stop loss at Rs 47,240 and going long on silver around Rs 71,400 for a target of Rs 72,600 with a stop loss at Rs 70,700.