Gold prices down Rs 11,300 from record highs

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Gold prices were trading weak on Tuesday amid weak global cues. Despite weakness in the US dollar and fall in US 10-year yields from the highs, gold still managed to trade lower indicating that the reason for the decline is portfolio balancing, said an analyst. Also, concerns around fresh COVID-19 cases across Europe limited losses in international spot prices. On MCX, gold April futures were trading Rs 107 or 0.24 per cent down at Rs 44,798 per 10 grams as against the previous close of Rs 44,905. Silver May futures were ruling at Rs 66,025 per kg, down Rs 306 or 0.46 per cent, as compared to a previous close of Rs 66,331 on the Multi Commodity Exchange. “Market participants moved back into the tech-heavy NASDAQ composite with specific companies rebounding which were under pressure for the last two weeks,” said Bhavik Patel, Senior Technical Research Analyst, Tradebulls Securities.

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In the first nine months of 2020, Gold ETF inflows were nothing short of staggering and in 2021, ETF flows have reversed with outflows around 112 tons while prices have dropped by $200. Patel added that outflows were also having a greater impact on prices on the way down. Moreover, markets were also carefully monitoring a slate of US bond auctions scheduled for this week and keeping an eye on the speech by Federal Reserve Jerome Powell this week. From a record high of Rs 56,191 per 10 gram on MCX in August 2020, gold prices have plunged Rs 11,393 per 10 gram or 20.27 per cent.

On a technical basis, in MCX, prices are in negative territory owing to the strong rupee as gold is trading below 20 (day moving average (Rs 45,252). Short term resistance is around Rs 45,500 and gold may find its feet if it manages to break above that level. “Till then, we are bearish on gold with a sell on rise strategy with 44200 as expected downside target,” Patel added.

Globally, spot gold fell 0.3 per cent to $1,733.69 per ounce. US gold futures were down 0.1 per cent to $1,736.20 per ounce. Holdings of the largest gold-backed exchange-traded-fund (ETF), New York’s SPDR Gold Trust, rose 0.3% on Friday from Thursday. Limiting the safe-haven metal’s losses, however, was a third wave of COVID-19 across Europe due to highly contagious coronavirus variants. This has raised concerns about another round of restrictions, with Paris going into a four-week lockdown late last week, according to Reuters.

Gold is struggling to gain momentum amid choppiness in US dollar and bond yields however the general bias may be on the upside amid dovish monetary policy stance of major central banks and persisting global economic challenges, says Ravindra Rao, VP- Head Commodity Research at Kotak Securities.

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