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Informist, Monday, Oct. 21, 2024

By Sandeep Sinha

MUMBAI – Futures contracts of gold hit lifetime highs on the Multi Commodity Exchange of India and COMEX on Monday as increasing geopolitical tensions in West Asia and an interest rate cut by the People’s Bank of China boosted bullion's safe-haven appeal. The positive sentiment was further aided by inflows in gold exchange-traded funds.

The People's Bank of China cut its benchmark lending rates early Monday to revive the economy. It slashed the one-year loan prime rate by 25 basis points to 3.10% from 3.35%. It also reduced the five-year loan prime rate by 25 bps to 3.60% from 3.85%. The expectation of lower interest rates increases the appeal of non-yielding assets such as gold. The country is the biggest importer of gold globally.

"Gold/silver scales to yet another all-time high in the domestic market following cues from overseas market, which were boosted by China's 25bps rate cut, and with continued support from festive demand in some of the Asian centres, buying among ETF investors, safe-haven demand due to geo-political uncertainty, and expectation of more rate cuts from global central banks," Pranav Mer, vice-president research commodity and currency at BlinkX and JM Financial, said in a note. However, he advised to remain a little cautious as a round of profit-booking cannot be ruled out.

On Friday, the gold holdings of SPDR Gold Trust, the world's largest gold-backed ETF, rose by 4.04 tonnes to 888.63 tonnes, the highest since Sept. 5, 2023. The fund has a market value of $77.48 billion.

At 1846 IST, the most-active December GOLD contract on the MCX was up 0.8% at INR 78,397 per 10 gm. The December contract hit an all-time high of INR 78,460 intraday Monday. The most-active December contract on COMEX was up 0.9% at $2,753.10 per ounce. It hit a fresh lifetime high of $2,755.2 earlier in the day. The highest call open interest for gold was at the INR 78,000 strike price, suggesting a bullish view. The highest put open interest was at the INR 74,000 strike for the Nov. 26 gold contract.

"Given the current geopolitical and economic backdrop, gold's upward momentum is likely to persist, with any dips being viewed as potential buying opportunities in the market," Jateen Trivedi, vice-president and research analyst at LKP Securities. said in a note.

However, further upside in bullion metal was limited due to the strength in the dollar, which makes commodities priced in the greenback expensive for holders of other currencies. At 1853 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was up 0.1% at 103.62.

SILVER prices rose on the MCX, taking cues from COMEX and positive trends in gold and base metals. At 1853 IST, the most-active December contract of silver on the MCX was up 3.1% at INR 98,325 per kg. The December contract hit an all-time high of INR 98,598 intraday Monday. The same-month contract on COMEX was 3.3% higher at $34.35 per ounce.

The MCX Bulldex, an index that tracks the real-time performance of gold and silver futures on the MCX, was up 326 points at 19719 points. As of 1856 IST, the December and February gold contracts recorded turnovers of INR 33.71 billion and INR 4.11 billion, respectively, on the MCX. The December and March silver contracts saw turnovers of INR 44.18 billion and INR 3.35 billion, respectively.

The spot gold-silver ratio, also known as the Mint ratio, fell to 80.13, indicating that gold had underperformed silver. The ratio measures the ounces of silver required to buy an ounce of gold. The ratio was 84.40 on Friday.

Outlook for the rest of the session:

--MCX gold seen at INR 77,900–INR 78,600 per 10 gm

--COMEX gold seen at $2,725.00–$2,774.00 an ounce

--MCX silver seen at INR 97,200-INR 99,000 per kg

--COMEX silver seen at $33.40-$35.00 an ounce

End

US$1 = INR 84.07

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

Edited by Manisha Baxla

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