Gold price sinks below key support

Mumbai-India (May 2)  Spot gold prices in the international market slid to $1,179/ounce last week, losing for a third straight week and closing 2 per cent lower. Bullion lost its investment appeal as US equities made strong gains.

The Nasdaq Composite index hit its all-time high on Thursday following gains in technology and healthcare stocks.

The data on existing home sales released mid-week too weighed on the metal, after it showed a strong 6.1 per cent surge in sales. Jobless claims rose by 1,000 to 2,95,000 for the week ended April 18. The underlying trend showed improvement in the job market.

The dollar index closed at 96.9, down by almost 0.6 per cent for the week. Though it had touched a high of 98.45 on Tuesday, it slipped from there to a low of 96.75 on Friday reacting to the weak durable goods data. Other precious metals, too, closed in the red. Silver plunged to $15.73/ounce, down 3.3 per cent for the week. Platinum was down four per cent and closed at $1124.2/ounce. In India, spot gold prices closed at ₹27,050 (for 10 gram of 24-carat gold) up by a marginal 0.6 per cent.

The Akshaya Tritiya-related demand did not see gold rates move up, as there was sufficient supply.

While there are signs of the US economy slowing with industrial output and new home sales still downbeat and the dollar taking a beating, yet US stocks are rallying without a break, taking the sheen off gold.

Till ambiguity remains on US economic health and the Federal Reserve’s rate cut, gold may remain range-bound, not moving decisively in either direction.

However, with prices last week breaking below a key support in the $1,175-1,180 zone, investors need to be watchful. The metal may show a further slide to $1,157 and $1,142 in the coming weeks.

The US GDP numbers will be released on Wednesday. This will be the advance estimate for the June quarter. After last week’s weak durable goods order report, economists are expecting US GDP growth for the first quarter to be around 1.1 or lower. Also scheduled for Wednesday is the Fed policy meeting.

The central bank is likely to stay quiet and not make any policy shifts as it may want to mull over the various data points that are painting a mixed picture of the economy. On Thursday is the release of the weekly jobless claims data and on Friday is the ISM Manufacturing Index data.

Domestic market

 Indian investors may see some gains on gold, if the rupee continues to weaken. But if there is any sharp correction in gold prices in the international market, it will offset currency related gains. Last week, the rupee moved from 63.56 against the dollar from 62.36. Gold and silver prices, however, did not move up as the prices were down in the international market.

MCX Gold futures closed at ₹26,701, down 0.4 per cent. MCX Silver futures closed at ₹35,950, down 1.4 per cent.

This week, the gold futures contract on MCX may inch up to ₹27,000, if the resistance at ₹26,970 breaks. The next target then will be ₹27,400. On a downside, the first level will be ₹26,500 and the next ₹26,380. MCX Silver may correct to ₹33,000 levels in the coming weeks as it has broken its support at ₹36,000 levels. If it moves up, the first resistance will be at ₹36,700.

Source: TheHindu