By Saumil Gandhi
Traders have embraced bullish momentum in bullion with full force following softer US inflation data. Comex silver surged more than 8%, and Comex gold posted its best weekly gain since April; it rose about 1.80% last week. Wednesday’s June consumer price index inflation report and Thursday’s June producer price index report offered convincing evidence that the inflation in the U.S. is starting to ease and it is nearing the Fed mandate.
The range that had been holding gold back below the $1935 mark for the previous two weeks was finally broken on the back of multiple supportive factors like the selloff in the Dollar Index, US Treasury yields, and optimism that the Fed’s tightening cycle is close to the end. As per weekly CFTC data, money managers have increased their bullish gold bets by 1,414 net-long positions to 100,619. Meanwhile, recent appreciation in the rupee has restricted upside in domestic bullion prices.
In the previous week, the MCX Gold August contract gained by 0.91% and settled at Rs 59,316, while open interest fell from Rs 10,881 to Rs 9173 contracts, which indicated short-covering activity in the domestic market. Comex Silver price closed around the $24.95 mark with sharp gains of 8%, the strongest weekly rise since mid-March, while MCX Silver September futures closed at the 75968 level with gains of more than 6% on a weekly basis.
Going forward, we believe the current macro picture is not favorable for the US dollar, which could lead to more upside for precious metals. The only significant market-moving data this week will be the Euro zone and United Kingdom inflation numbers, which will be released on Wednesday and could offer volatility in bullion prices.
From a technical perspective, the short-term trend remains moderately bullish for precious metals. Traders should adopt a buy-on-dip strategy. Comex gold rate has immediate resistance at $1983 and support at $1925 per ounce. Comex Silver has first resistance at $25.50, then $26.05, and support at $24.0 (100 DEMA). Back home, MCX Gold price could move in the range of Rs 58,600 to Rs 60,300. MCX Silver September contract has resistance at Rs 77,380 and support at Rs 73,600 for this week.
(Saumil Gandhi, Senior Analyst (Commodities), HDFC Securities. Views expressed are the author’s own. Please consult your financial advisor before investing.)