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Informist, Friday, Nov. 8, 2024

By Sandeep Sinha

MUMBAI – Futures contracts of gold fell on the Multi Commodity Exchange of India and COMEX today because of the outflow from the exchange-traded funds. The sentiment was also weighed down by a firm dollar and profit-taking by investors.

On Thursday, gold holdings with SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell by 2.88 tn to 880.58 tn. The fund has a market value of $76.18 bln. On the National Stock Exchange, the total value of gold ETF traded was INR 1.39 billion.

At 1815 IST, the dollar index, which measures the strength of the greenback against a basket of major currencies, was up 0.2% at 104.53, because of the hawkish Federal Reserve's stance. A stronger greenback makes dollar-denominated precious commodities more expensive for those holding other currencies, dulling the demand for gold. 

The US Federal Open Market Committee cut interest rates by 25 basis points to 4.50-4.75% early Friday. Fed chief Jerome Powell said the committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. 

Diane Swonk, chief economist, KPMG US, said in a post that the statement following the meeting was a little more hawkish. "Inflation has made progress toward the Committee's 2 percent objective but remains somewhat elevated," Swonk said. The Fed chief did not rule out another rate cut in December, but to preserve optionality, rate cuts will be decided "on a meeting-by-meeting basis", Swonk said.

"Gold traded weak amid strength in the dollar index and the Federal Reserve's policy announcement aligned with expectations of a 0.25% rate cut. The Fed's outlook, coupled with inflation trending toward the targeted 2%, offered no new surprises to support gold prices," said Jateen Trivedi, vice-president and research analyst at LKP Securities, in an email note. "Profit booking continued following Trump's election victory. Gold is currently facing resistance in the INR 77,250-INR 77,350 range, while a strong short-term support level is seen at INR 76,500," Trivedi said.

At 1815 IST, the most-active December GOLD contract on the MCX was down 0.2% at INR 77,272 per 10 gram. The most-active December contract on COMEX was 0.3% lower at $2,697.70 per ounce. The highest call open interest for gold was at the INR 80,000 strike price, suggesting a bullish view. The highest put open interest was at the INR 75,000-INR 74,000 strike for the Nov. 26 gold contract.

For further cues, investors will look for the University of Michigan Consumer Sentiment report and inflation expectations later Friday that could influence gold's continued movement.

On the technical front, Enrich Money expects some more downside in gold in the upcoming sessions. If the market can break below the current resistance level of INR 77,620, it may rise to INR 78,200 and INR 78,950 levels. However, if the price breaks below the support level of INR 76,650, it could signal a downward trend, potentially leading to a fall to INR 76,000 and INR 75,350 levels.

SILVER prices fell, taking cues from the COMEX and weak trends in gold and industrial metals. At 1815 IST, the most-active December contract of silver on the MCX was down 0.7% at INR 91,668 per kg. The same-month contract on the COMEX was 0.7% lower at $31.62 per ounce.

On the options front, the highest call open interest for silver was at the INR 100,000-INR 105,000 strike price, suggesting a bullish view. The highest put open interest was at INR 90,000-INR 85,000 strike for the Nov. 26 silver expiry.

Reliance Securities has recommended going short in the evening session as the Relative Price Index is trading below 50, suggesting weakness in the counter.

The MCX Bulldex, an index that tracks the real-time performance of gold and silver futures on the MCX, was down 72 points at 19125 points. As of 1812 IST, the December and February gold contracts recorded turnovers of INR 24.68 billion and INR 6.82 billion, respectively, on the MCX. The December and March silver contracts saw turnovers of INR 18.86 billion and INR 3.75 billion, respectively.

The spot gold-silver ratio, also known as the Mint ratio, rose to 85.39, indicating that gold had outperformed silver. The ratio measures the ounces of silver required to buy an ounce of gold. The ratio was 85.33 on Thursday.

Outlook for the rest of the session:

--MCX gold seen at INR 76,783–INR 77,601 per 10 gm

--COMEX gold seen at $2,664.0–$2,722.0 an ounce

--MCX silver seen at INR 90,480-INR 92,280 per kg

--COMEX silver seen at $31.20-$32.20 an ounce

End

US$1 = INR 83.38

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

Edited by Akul Nishant Akhoury

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