Gold, silver prices surge after Fed comments; expect bullion prices to trade sideways to up this week

Gold price is expected to move sideways to up this week.
(Image: REUTERS)

By Tapan Patel

Commodity prices traded higher with most of the commodities in the non-agro segment rallying the most in the last trading session of the previous week. Bullion prices gained post-FED speech while base metals were supported by weaker dollar and reopening of port activities in China. Crude oil prices rallied more than 10% on supply disruption fears amid hurricane threats in Gulf of Mexico.

Gold prices traded higher with spot gold prices at COMEX rose by 2.05% at $1817.57 per ounce for the week. Gold October futures at MCX ended 0.81% up at Rs 47,538 per 10 gram limiting upside on rupee appreciation. The spot rupee rallied by 0.95% against the dollar for the week. Gold ETF holdings continued outflows as holdings at SPDR Gold Shares fell near their lowest since April last year to 1002 tonnes from the previous week’s 1012 tonnes for the week. The CFTC data showed that money managers increased their net long positions by 16943 lots in last week.

Silver prices traded lower with spot silver prices at COMEX rallied by 4.35% to $24.03 per ounce for the week. MCX Silver September futures rose by 3.02% to Rs 63,585 per KG. Silver prices outperformed Gold for the week supported by a gain in industrial metals amid eased COVID worries in China. The reopening of shipping activities from key ports boosted investment sentiment silver along with strong precious metals. in The CFTC data showed that money managers increased their net long positions by 418 lots in last week.

Bullion prices traded during the higher during the week with gold prices reported the best week since May hitting three-week highs. The precious metals prices rallied on Friday making most of the gains of the week with comments from US Jackson Hole Symposium. Bullion prices got support from the weaker dollar and fall in US treasury yields after US Fed Chairman sounded more cautious and failed to give clear hint on asset tapering. Jerome Powell said that the U.S. economy was on good footing but still vulnerable from risks posed by the coronavirus pandemic. The dollar index fell by 0.87% to 92.69 for the week while US 10 year bond yields declined to 1.31%. Bullion prices may trade higher on dovish Fed stance with pandemic worries and inflation concerns and slower economic growth. 

We expect gold prices to trade sideways to up in the coming week with COMEX spot gold resistance at $1860 per ounce and support at $1770 per ounce. At MCX, Gold October prices have near term resistance at Rs 48,100 per 10 grams and support at Rs 46,800 per 10 gram. COMEX silver spot has near term resistance at $24.90 per ounce with support at $23.20 per ounce. MCX Silver September has important resistance at Rs 67,000 per KG and support at Rs 60,500 per KG.

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

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