By Saumil Gandhi
Commodity prices dropped last week except gold prices, with most commodities tumbling earlier in the week as fears of more aggressive U.S. interest rate hikes hit demand. However, some of them recovered losses on Friday post US job market data. Commodities markets were extraordinarily active in the last trading session of the week as treasury yields moved sharply lower, after the FedWatch tool flipped back to indicating a greater likelihood for a 25 basis point hike than a 50 bps hike at the March FOMC meeting post Friday’s US macro data.
Comex Spot Gold prices rallied to three weeks high on Friday and settled up by 0.63% weekly basis. Gold April future at MCX gained by 0.77% to Rs 56,150 per 10 grams. Gold slumped earlier this week after Fed Chair Jerome Powell said the central bank was prepared to increase the pace of its tightening if inflation and jobs data stayed hot. He later clarified no decision had been made on the size of the March hike. However, gold prices witnessed a sharp rally on Friday after a mixed US jobs report and a widening bank rout in the financial industry. On the demand front, ongoing central bank gold buying with the latest purchases this week made by Singapore and Chinese central banks. While ETF investment demand continued to decline, total gold held by ETFs fell 2.1% this year to 91.8 million ounces, the lowest level since April 8, 2020.
Comex Silver prices recovered from weekly low and still closed lower by 3.39% at $21.26 per ounce. MCX Silver May futures settled lower by 2.35 % to Rs 61353 per kg for the week. Meanwhile after sharp correction in price investment demand improved, ETFs added 1.01 million troy ounces of silver to their holdings in the last trading session of the week.
We expect bullion prices will fluctuate within a broader range and traders’ focus will turn to the release of the consumer price index on Tuesday, which could be critical in determining the size of the Fed’s next move. Comex spot gold having resistances at $1895/1920 per ounce and support at $1835/1810 per ounce. MCX Gold April future has resistance at Rs 56,980 per 10 grams and support at Rs 55,080 per 10 grams. Comex Spot silver having resistances at $ 21.40/$22.50 per ounce and support at $19.80 per ounce. MCX Silver May future price face resistance at Rs 65,080 per 1kg and find support at Rs 61,900 per 1 kg for the next week.
(Saumil Gandhi, Senior Analyst (Commodities), HDFC Securities. Views expressed are the author’s own. Please consult your financial advisor before investing.)