Gold, silver prices fall for second week straight; is economic recovery hitting precious metals?

Gold prices traded down last week.
(Image: REUTERS)

By Tapan Patel

Commodity prices traded mixed during the week passed by with Bullion prices witnessed decline for the second week with risk on sentiments. Base metals continued to trade higher with Nickel rallying the most followed by Copper and Lead on a strong demand outlook. Crude oil prices traded higher on demand, growth prospectus.

Gold prices traded down with spot gold prices at COMEX ended at $1769 per ounce for the week. Gold prices at MCX fell by 1.67% to Rs 46,737 per 10 gram pressured by sharp rupee appreciation. The spot rupee rallied by 1.25% against the dollar for the week. Gold ETF holdings continued outflow as holdings at SPDR Gold Shares declined to 1017 tonnes from previous week’s 1020 tonnes. The CFTC data showed that money managers decreased their net long positions by 6146 lots in last week.

Silver prices traded weak with spot silver prices at COMEX ended marginal down to $25.92 per ounce for the week. MCX Silver May futures fell by more than 1% to Rs 68,423 per KG. The CFTC data showed that money managers increased their net long positions by 2923 lots in last week. 

Bullion prices traded lower during the week as prices struggled to break key resistance levels. Precious metals prices traded weak with dollar recovery and rise in US bond yields. The strong US GDP numbers pressured bullion prices to trade down despite of expanding FED balance sheet and another stimulus from the Biden administration. The dollar index rose above 91 mark gaining 0.46% while US 10 year treasury yields rallied to 1.62% during the week recovered from recent lows of 1.55%. The global vaccine rollouts have increased consumer confidence and led to stronger than expected economic recovery which has capped upside in precious metals cornering inflation concerns.

We expect gold prices to trade sideways to down in the coming week with COMEX spot gold resistance at $1800 per ounce and support at $1750 per ounce. At MCX, Gold June prices have near term resistance at Rs 47,500 per 10 grams and support at Rs 46,200 per 10 gram. COMEX silver spot has near term resistance at $26.80 per ounce with support at $25.20 per ounce. MCX Silver July has important resistance at Rs 69,800 per KG and support at Rs 66,800 per KG.

(Tapan Patel is a Senior Analyst (Commodities) at HDFC securities. The views expressed are the author’s own. Please consult your financial advisor before investing.)