By Saumil Gandhi
Precious metals headed for their first weekly gain in three weeks amid a softer US dollar and optimism that the Fed could go for the status quo in its June meeting. In the energy space, crude oil prices managed to trim losses after progress was made on the US debt deal and on expectations of OPEC supply cut. Natural gas prices also traded lower as mild weather conditions curbed domestic demand for the power-generation fuel.
Base metals prices consolidated at the lower end amid dismal Chinese economic data. Demand concerns from the top metal-consuming country, China and a gloomy global economic outlook offset optimism from the U.S. debt ceiling deal and a softer dollar.
Gold price gave up most of their weekly gains on Friday after upbeat US nonfarm payroll data. The report showed that nonfarm payrolls increased by 339,000 in May, far outstripping the 180,000 forecasts. Still, gold prices managed to end on a positive note on the back of investors’ optimism about the Federal Reserve rate hike cycle nearing its end after some Fed officials advocated pausing the central bank’s monetary tightening while they assessed the impact on the economy. The US dollar and US Treasury yields corrected in the previous week, which boosted sentiment for the bull camp.
Meanwhile, markets are expecting a roughly 74% chance that the Fed will stay with its current policy rate at its June meeting, compared with a near 35% chance a week ago, according to the CME Fed Watch tool.
The Comex silver price surged to a two-week high and settled higher by 1.31% at $23.60 per ounce in the previous week, while the MCX Silver July contract closed higher by 1.11% at Rs 72020 per 1 kg. Silver prices outpaced gold prices in the previous week on the back of industrial demand.
Looking forward, we expect precious metals’ short-term outlook to remain moderately bearish as Friday’s resilient US jobs data from April delayed looming recession calls and the debt ceiling drama got resolved, which reduced safe-haven demand.
On the technical front, Comex spot gold rate has downswing support around $1925/oz. The fall below said support will accelerate selling pressure and we could see $1910 and $1880 per ounce. For the time being, $1985 to $2005 per ounce remain the major supply area. Comex Silver rate has immediate support at $22.65 followed by $21.80 per ounce and resistance at $24.35 and then $25.75 per ounce.
Back home, MCX Gold August futures could hold support at Rs 59,080 per 10 grams and get resisted at Rs 60,580 per 10 grams. MCX Silver July futures find support at Rs 70,500 per 1kg and face resistance at Rs 73,700 per 1 kg for the week.
(Saumil Gandhi, Senior Analyst (Commodities), HDFC Securities. Views expressed are analyst’s own. Please consult your financial advisor before investing.)
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