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Informist, Monday, Jul 22, 2024

By J. Navya Sruthi

MUMBAI – Futures contracts of gold traded lower today on the Multi Commodity Exchange of India, as investors hope for an import duty cut in the Union Budget for 2024-25 (Apr-Mar) to be presented on Tuesday, analysts said. Silver prices also traded in the red today, taking cues from base metals.    

GOLD prices are likely to be volatile today and Tuesday, Manoj Kumar Jain, director at brokerage Prithvi Finmart said, adding that market participants expect the government to reduce the import duty on the commodity. 

"For gold, there are a few expectations of no change, while some expect a cut of either 2.5% or 5%, from current duty of 15%," Motilal Oswal Financial Services said in a note. The current import duty on gold is 15%, which includes 10% of basic customs duty and 5% of agriculture infrastructure development cess. 

If basic customs duty is reduced by 2.5%, an immediate price fall of 1,500 rupees per 10 gm is seen, and in case of a 5% cut, the brokerage expects a 3,000-rupee fall in prices. However, if there is no change in import duty, an immediate boost in gold prices is expected, according to the brokerage's report. 

At 1500 IST, the most-active August gold contract on the MCX was down 0.2% at 72,821 rupees per 10 gm. The same-month contract on COMEX was higher by 0.2% at $2,403.2 per ounce.

On the international exchange, gold prices traded higher due to geopolitical tensions and expectations of a 25-basis-point rate cut by the US Federal Reserve at the September meeting. At the upcoming Federal Open Market Committee's meeting on Jul 30-31, investors expect the committee to keep interest rates unchanged and will look for cues on interest rate cuts later in the year.

According to the CME FedWatch tool, 93.6% expect a 25-basis-point rate cut by the Fed in September, while 2.5% expect a 50-bps rate cut.

"Political uncertainty in the US election after Biden pulled out (of) the race tends to be good for gold's appeal as a safe-haven investment," Dow Jones quoted Phillip Nova analyst Priyanka Sachdeva as saying in a note. On Sunday, US President Joe Biden withdrew from the 2024 presidential election and endorsed Vice President Kamala Harris as the Democratic Party's new candidate.

SILVER prices were down today on the MCX, taking weak cues from COMEX and industrial metals. Despite a 10-bps reduction in prime lending rates by the People's Bank of China today, silver and base metals were expected to trade lower as market participants expect more stimulus measures from the central bank, Jain said. 

The one-year loan prime rate was lowered by 10 bps to 3.35% from 3.45% previously, while the five-year loan prime rate was reduced by the same margin to 3.85% from 3.95%. The central bank's decision comes amid a decline in economic growth in the second quarter. Data released last week showed GDP growth in China was 4.7% in the second quarter, compared with the forecast of 5.1%. 

At 1500 IST, the most-active September contract for silver on the MCX was down 0.6% at 89,107 rupees per kg. The same-month contract on COMEX fell 0.1% to $29.26 per oz.

Outlook for the rest of the session:

--MCX gold seen at 72,500–73,330 rupees per 10 gm

--COMEX gold seen at $2,380–$2,422 an oz

--MCX silver seen at 88,000-91,400 rupees per kg

--COMEX silver seen at $28.80-$29.70 an oz

End

US$1 = 83.66 rupees

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Tanima Banerjee

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