by Taban Battle
Commodity prices traded in mixed with gold and crude oil prices higher during the week, while base metals closed in red and witnessed selling. Bullion prices rose on the dollar’s weakness while crude oil prices rose amid increasing demand optimism. Base metals traded weakly as supply expectations rose as concerns over coal shortages in China eased.
Gold prices traded strongly with the Comex spot gold price up 1.42% to $1,793 an ounce during the week. MCX’s December gold futures closed 1.24% higher at Rs. 47,797 per 10 grams limits the gain from appreciation of the rupee. The spot rupee rose 0.48% to 74.90 mark against the dollar during the week. ETF holdings continued their outflows as holdings in SPDR Gold Shares declined to 978 tons from 980 tons in the previous week. Commodity Futures Trading Commission (CFTC) data showed that money managers cut their net long positions by 536 contracts last week.
Silver prices are up with Comex silver prices up 4.35% to $24.32 an ounce during the week. MCX Silver futures for December rose 3.77% to Rs. 65,656 per kilogram per week. Silver prices outperformed gold with higher demand in industries despite the selling of base metals. CFTC data showed that money managers increased their net long positions by 14,636 contracts last week.
Bullion prices rose during the week supported by a weaker dollar and inflation fears despite higher US bond yields. Precious metals maintained a stable trading range despite positive equity indicators and easing concerns over China’s Evergrande debt crisis. Bullion prices added the risk premium after Russia and some parts of Europe imposed coronavirus restrictions as virus cases rose. Bullion prices got a final boost on Friday after US Federal Reserve Chairman Jerome Powell confirmed the central bank’s plans to begin reducing its $120 billion monthly stimulus between November and December. Traders and investors remained mixed on the Fed’s stance as Powell did not indicate any timetable for raising interest rates. The dollar index closed 0.31% lower while the 10-year US Treasury yield rose to 1.638% on Friday.
We expect gold prices to trade sideways to hit a rally next week with the Comex Gold spot resistance at $1,833 an ounce and support at $1,770 an ounce. On MCX, December gold prices have near-term resistance at Rs 48,200 per 10g and support at Rs 47,200 per 10g. Comex silver price has near-term resistance at $25.20 an ounce with support at $23.50 an ounce. MCX Silver December has significant resistance at Rs 67,000 per kg and support at Rs 62,800 per kg.
(Tapan Patel is a Senior Analyst (Commodities) at HDFC Securities. The opinions expressed are those of the author. Please consult your financial advisor before investing.)