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Gold, silver prices fall for third week straight; will precious metals continue to decline?

Gold ETF holdings declined as holdings at SPDR Gold Shares fell to 1,069 tonnes to the lowest since last June.

By Tapan Patel

Commodity prices traded lower during the week passed by with most of the commodities witnessed selling except crude oil. Bullion prices extended the decline for the week while base metals were down on profit-booking and weak Chinese data. Crude oil prices rallied on lower supply concerns and stronger demand optimism.

Gold prices traded lower with spot gold prices at COMEX fell by 1.93% to $1700 per ounce for the week. Gold prices at MCX shed more than 2% ended at Rs 44,683 per 10 grams witnessing additional pressure from rupee appreciation. The spot rupee was up by 0.60% against the dollar for the week. Gold ETF holdings declined as holdings at SPDR Gold Shares fell to 1,069 tonnes to the lowest since last June. The CFTC data showed that money managers decreased net long positions by 25,539 lots the last week. 

Silver prices witnessed heavy selling with spot silver prices at COMEX plunged by 5.33% to $25.25 per ounce for the week. MCX Silver May futures fell by more than 4% to Rs. 64500 per KG. The broad selling of precious metals and industrial metals pushed silver prices down during the week. The CFTC data showed that money managers decreased net long positions by 7915 lots last week. 

Bullion prices fell for the third consecutive week as risk-on sentiments kept investors away from precious metals. The selling of precious metal is driven by a recent surge in US bond yields despite selling in equity markets. The US 10 year treasury yields rose to 1.60% during the week after US FED Chairman signalled some spike in inflation keeping mum about stepping up the bond-buying program. Bullion prices declined on stronger dollar as traders and investors switched to the best alternative to safe haven. The dollar index rose by 1.20% nearing 92 mark for the week.

We expect bullion prices to trade sideways to down in the coming week witnessing some pullback with COMEX spot gold having resistance near $1740 per ounce and support at $1690/1650 per ounce. At MCX, Gold April prices have near term resistance at Rs 45,200 per 10 grams and support at Rs 44,000 per 10 gram. COMEX silver spot has near term resistance at $26.20 per ounce with support at $24.40 per ounce. MCX Silver May has important resistance at Rs 67,000 per KG and support at Rs 62,500 per KG.

(Tapan Patel is a Senior Analyst (Commodities) at HDFC securities. The views expressed are the author’s own. Please consult your financial advisor before investing.)

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