Week Ahead: Traders to closely monitor FED Chair’s testimony; Gold support at Rs

By Saumil Gandhi

The commodities complex as a whole witnessed whipsaws last week on the back of varied fundamental cues, with the exception of zinc and natural gas. In the bullion pack, both silver and gold prices have rebounded from their lower levels as the US dollar hits a fresh five-week low. Among the base metals, lead and zinc outperformed, while copper prices managed modest gains on the back of an improved demand outlook after China lowered its short-term lending rates for the first time in ten months. A weaker dollar and expectations of further stimulus in China helped crude prices achieve their first weekly gain in three weeks. Despite a lacklustre increase in storage, natural gas surged. It was the largest weekly price increase since March for the Natural gas.

In the previous week, gold prices closed marginally lower on the back of hawkish signals from the Federal Reserve and the European Central Bank. The gold price fluctuated erratically last week as investors balanced the dollar’s general decline against the Federal Reserve’s hawkish view on interest rates. Two Fed officials said on Friday that the US central bank may have to raise interest rates further to tame price pressures, a day after ECB President Christine Lagarde said another hike in July is “very likely. Meanwhile, money managers have decreased their bullish gold bets by 20,861 net-long positions to 93,304. The net-long position was the least bullish in almost three months, as per weekly CFTC data on futures and options showed.

Comex Silver price settled with a minor decline of 0.38% at $24.0 per ounce. MCX Silver July’s future price dropped by 1.50% and closed at Rs 72688 per 1 kg. Exchange-traded funds cut 1.45 million troy ounces of silver from their holdings in the last trading session.

Going forward, this week, market participants will closely monitor FED Chair Jay Powell’s testimony, US jobless claims, and consumer confidence data. Despite the Fed’s aggressive comments, the prices of gold and silver have recovered from lower levels, and the short-term rise in the dollar index appears to be coming to an end, which raises the likelihood of a continuation of the rally in precious metals. Additionally, on the technical front, Comex spot gold prices were able to close above the critical support level of $1935/oz, which signals that the price is likely to increase further. Comex spot gold has support at $1925/oz and resistance at $1984/oz. Comex Silver has immediate support at $22.70, followed by $21.95 per ounce, and resistance at $24.60 and then $25.75 per ounce. Back home, the MCX Gold August future has resistance at Rs 60170 per 10 grams and support at Rs 58900 per 10 grams. MCX Silver July contract has resistance at Rs 73980 per 1kg and support at Rs 71370 per 1 kg for this week.

(Saumil Gandhi, Senior Analyst (Commodities), HDFC Securities. Views expressed are author’s own.)