Gold to trade sideways to up this week; ‘weak economic data may boost prices on recession fears’

By Tapan Patel

Commodity prices traded higher with most of the commodities in the non-agro segment witnessed strong recovery during the week following the weaker dollar. Bullion prices rallied on safe haven buying post disappointed US GDP data and modest rate hike from FED. Crude oil prices traded up on higher demand and capped supplies over persistent geopolitical factors. Base metals traded higher over tight supplies and demand growth prospects.

Silver prices rocketed during the week with spot silver prices at COMEX surged by 9.45% to $20.36 per ounce for the week. MCX Silver September futures rose by 5.88% at Rs. 58370 per KG for the week. Silver prices rallied from the support levels boosted by bargain buying and recovery in industrial metals. The gold/silver ratio fell from 91 to 86.70 returning to its mean divergence. The CFTC data showed that money managers have increased their short positions in silver by 4004 lots.

Bullion prices traded higher with the gold process reporting the best weekly gains since March 2022 as investors weighed expectations of a slower pace of FED rate hike and concerns over an economic slowdown. Bullion prices recovered sharply after the US FED hiked interest rates by 75 bps while adopting cautious tone over economic recovery. The real boost came after US GDP contracted for the second month which pushed dollar and US treasuries down which attracted safe buying in gold and silver. The dollar index fell by 0.77% to 105.90 for the week while 10 year US treasury yields fell to 2.65%. Bullion prices may continue to trade with firms trading for the short term on a weaker dollar. Another round of weak economic data may further boost safe haven buying over recession fears.

We expect gold prices to trade sideways to up this week with COMEX spot gold resistance at $1800 per ounce and support at $1740 per ounce. At MCX, Gold October prices have near term resistance at Rs. 52200 per 10 grams and support at Rs. 51100 per 10 gram. COMEX Spot silver has near term resistance at $20.90 per ounce with support at $19.50 per ounce. MCX Silver September has important resistance at Rs. 61200 per KG and support at Rs. 55800 per KG.

(Tapan Patel, Senior Analyst (Commodities), HDFC Securities. Views expressed are the author’s own.)