Gold, silver rates may continue climbing higher; bullion prices at 10-week high

The precious metals rallied on dollar decline and fall in US bond yields on clarification of US Treasury secretary Jennet Yellen over interest rates.
(Image: REUTERS)

By Tapan Patel

Commodity prices traded higher during the week passed by with Bullion prices witnessing the best week of the last six months. Crude oil prices reported a second weekly gain with broad buying in commodities. Base metals extended gains with Copper and Aluminium prices rose the most boosted by strong demand outlook and lower supply concerns. 

Gold prices traded higher with spot gold prices at COMEX rose by 3.51% to $1831 per ounce for the week. Gold prices at MCX gained by 2.17% to Rs 47,751 per 10-gram limiting gains by sharp rupee appreciation. The spot rupee rose by 0.77% against the dollar for the week. Gold ETF holdings witnessed inflows as holdings at SPDR Gold Shares rose to 1025 tonnes from previous week’s 1017 tonnes. The CFTC data showed that money managers increased their net long positions by 2979 lots in last week.

Silver prices outperformed gold with spot silver prices at COMEX rallied by 5.91% to $27.45 per ounce for the week. MCX Silver May futures rose 5.78% to Rs 71,429 per KG. The CFTC data showed that money managers increased their net long positions by 6098 lots in last week. The strong rally in industrial metals boosted buying in Silver on-demand growth optimism.

Bullion prices witnessed strong buying during the week hitting the 10 week high levels with gold prices crossing the key resistance of $1800 per ounce. The precious metals rallied on dollar decline and fall in US bond yields on clarification of US Treasury secretary Jennet Yellen over interest rates. The dollar index fell by more than 1% to 90.23 mark while US 10 year treasury yields declined to 1.58% during the week. Bullion prices got additional boost from weak US job market data on Friday as US unemployment rose by 6.1% in April. The dovish Fed stance and slower US economic recovery are the key bullish factors for precious metals. The surge in commodities may add worries of higher inflation for the markets. 

We expect gold prices to trade up in the coming week with COMEX spot gold resistance at $1860 per ounce and support at $1795 per ounce. At MCX, Gold June prices have near term resistance at Rs 48,400 per 10 grams and support at Rs 46,600 per 10 gram. COMEX silver spot has near term resistance at $28.30 per ounce with support at $26 per ounce. MCX Silver July has important resistance at Rs 74,400 per KG and support at Rs 68,800 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.)