Gold price range-bound since May as natural gas, silver soar 3% last week; US Fed verdict, US CPI eyed for cues

Gold price range-bound since May as natural gas, silver soar 3% last week; US Fed verdict, US CPI eyed for cues

By Saumil Gandhi

Most commodities prices posted gains, except crude oil. Under the bullion pack, silver has registered a strong surge with nearly 3% weekly gains. This positive trend can be attributed to the weakening of the US dollar and the recovery in base metals. In the energy basket, crude oil prices settled in the red even after Saudi Arabia’s unilateral vow to reduce output, as concerns about demand weighed on the oil market. While natural gas prices edged up with gains of more than 3% on a weekly basis, the rise in prices was mainly supported by hotter weather conditions in the US. Among the base metal pack, zinc outperformed, it rose more than 4.0%, while copper posted moderate gains, in the previous week.

The US dollar retreated after a spike in weekly jobless claims raised hopes that a peak in U.S. interest rates was nearby, boosting the precious metals rally. Money managers have increased their bullish gold bets by 6,312 net-long positions to 114,165, weekly CFTC data on futures and options showed. Comex Silver’s price settled higher by 2.91% at $24.29 per ounce, in the previous week. MCX Silver July contract price closed higher by 2.47% at Rs 73796 per 1 kg highest level since 12 May.  

This week, market participants will closely monitor US consumer inflation data as it provides further insights into the Federal Reserve’s future interest rate decisions. While most awaited the outcome of the Federal Reserve policy meeting on June 14, an important trigger for precious metals, a pause in the Fed’s rate hike cycle and dovish forward guidance could offer some support to gold prices.

On the technical front, we believe, looking at the daily time frame, that Comex Gold rate could hold bullishness until it trades above $1930 per ounce. For the time being, $1995 to $2017 per ounce remain the major supply areas. Overall, a weekly range could be expected for Comex gold between $2017 – $1930. Comex Silver price has immediate support at $23.50 followed by $22.80 per ounce and resistance at $24.70 and then $25.80 per ounce.

Back home, MCX Gold August futures could hold support at Rs 59,280 per 10 grams and get resisted at Rs 60,820 per 10 grams. MCX Silver July futures find support at Rs 71,170 per 1kg and face resistance at Rs 75,300 per 1 kg for the week.

(By Saumil Gandhi, Senior Analyst (Commodities), HDFC Securities. Views expressed are author’s own. Please consult your financial advisor before investing.)