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Gold, silver futures rebound; Analysts expect relief rally at lower levels

Domestic gold and silver futures recovered some of the previous day’s losses on Friday as market participants looked past the US central bank’s surprise hawkish tilt.

MCX gold futures (August 5) traded 0.56 per cent higher at Rs 47,220 per 10 grams in the early hours of the evening session, while silver futures (July 5) were up 1.33 per cent at Rs 68,501 per kilogram. Bullion futures remained firm in positive territory throughout the morning session, in which gold jumped as much as 0.91 per cent to Rs 47,387 and silver climbed 1.69 per cent to touch the Rs 68,740 mark.

On Thursday, the nearby-month contracts of gold and silver had plunged 3.10 per cent to Rs 46,781 per 10 grams and 5.10 per cent to Rs 67,858 per kilogram, respectively, as analysts viewed the Federal Reserve’s optimistic view on economic growth as negative for precious metals. They felt the announcements dented bullion’s appeal as an inflation hedge.

On Wednesday, the US central bank had brought forward projections for the post-Covid benchmark interest rate hikes into 2023, sending the dollar to a two-month peak.

Global gold and silver benchmarks were last seen trading up 0.98 per cent at $1,790.60 per ounce and 1.26 per cent at $26.24 per ounce on Friday, respectively.

After Thursday’s crash, analysts expect a relief rally in both precious metals in the near term, but caution that volatility due to currency fluctuations cannot be ruled out. Technically, they see support for the international gold benchmark at $1,762-1,750 and resistance at $1,792-1,810 per ounce.

Back home, spot gold (22 carats) gained by Rs 188 to Rs 46,460 per 10 grams in New Delhi and silver by Rs 173 to Rs 67,658 per kilogram.

“A relief rally in gold and silver is likely to start at lower levels. The rally in the dollar index has put pressure on precious metals. The sharp dollar rebound has led to weaker sentiments across many assets including bullion and is likely to be a cap on prices,” said Navneet Damani, VP-Commodities Research, Motilal Oswal Financial Services.

Technical outlook

MCX gold futures are expected to find support at Rs 46,660-46,400 levels and resistance at Rs 47,200-47,550, said Manoj Kumar Jain, Director-Head of Commodity Research at Prithvi Finmart. For silver, support is pegged at Rs 67,100-66,600 and resistance at Rs 68,200-68,800, he added.

Jain suggests buying MCX gold futures around Rs 46,800 for a target of Rs 47,300 with a stop loss at Rs 46,600, and silver around Rs 67,200 for a target of Rs 68,500 with a stop loss at Rs 66,600.

Damani expects MCX gold to hover in the range of Rs 46,650-47,350 per 10 grams in the near term.

Meanwhile, the rupee appreciated by 22 paise to end at 73.86 against the dollar, halting an eight-day losing streak in which it had depreciated by 128 paise. The dollar index – which gauges the greenback against six peers – was last seen trading 0.16 per cent higher at 92.02.

Dalal Street ended a wild session nearly unchanged with the S&P BSE Sensex index recovering 1.44 per cent from the day’s low to end at 52,344.45. The broader NSE Nifty50 benchmark bounced back 1.50 per cent to settle at 15,683.35.