May 30, 2023
Gold to trade sideways to down this week, Silver to trade lower on weak demand; check support, resistance
By Tapan Patel
Commodity prices traded lower with most of the commodities in the non-agro segment continued downside for the week except energy complex. Bullion prices traded volatile during the week on FED jitters and a stronger dollar. Crude oil prices rallied nearly 5% while natural gas prices rallied by more than 12% for the week on tight supplies and higher demand amid geopolitical risk. Base metals ended down on China demand worries following slowdown fear amid rising COVID-19 cases. The dollar index ended 0.68% up at 103.66 for the week.
Silver prices extended decline with spot silver prices at COMEX fell by 1.83% to $22.36 per ounce for the week. MCX Silver May futures fell by 1.59% to Rs. 62548 per KG for the week. Silver prices declined with fall in industrial metals amid rising COVID cases in China. The CFTC data showed that money managers have decreased their net long positions by 11273 lots in the last week.
Bullion prices fell for the third week on the trot with gold prices reporting the longest weekly loses since December 2021. Bullion prices traded under pressure on stronger dollar and volatile bond yields as speculation over high inflation worries kept bond yields up. The market had already discounted 50 bps hike in key interest rates which supported precious metals to rebound post US FOMC after FED chair Jerome Powell ruled out more aggressive increases. A selloff in long-end Treasuries has pushed 10-year yields firmly above 3%. The rising energy costs over the supply worries has spurred inflation worries while major central banks are set to shift policy stance to tackle inflation. The geopolitical risk over Russia-Ukraine conflict, higher oil prices and China COVID worries are the supporting factors which may limit downside in precious metals.
Gold prices may struggle to find a trend in short term and are expected to keep current trading range intact. Silver prices may trade under pressure following weaker demand.
We expect gold prices to trade sideways to down this week with COMEX spot gold resistance at $1920 per ounce and support at $1850 per ounce. At MCX, Gold June prices have near term resistance at Rs. 52100 per 10 grams and support at Rs. 50800 per 10 gram. COMEX Spot silver has near term resistance at $23.60 per ounce with support at $21.30 per ounce. MCX Silver July has important resistance at Rs. 64500 per KG and support at Rs. 60200 per KG.
(Tapan Patel, Senior Analyst (Commodities), HDFC Securities. Views expressed are the author’s own.)
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