Data showed US factory activity gathered speed in early May amid strong domestic demand. Fed minutes showed a “number” of officials were ready to taper monetary policy on continued economic recovery, although market participants shrugged off those concerns as they do not expect it to be imminent.
The dollar stood near its lowest levels in three months against the resurgent euro and other European currencies, making gold cheaper for other currency holders. Benchmark 10-year Treasury yields were hovering near a week low. Lower bond yields reduce the opportunity cost of holding non-interest bearing gold.
Analysts also noted that inflows into gold exchange-traded-funds (ETFs) indicated that investors are buying precious metal to hedge against inflation worries. Market watchers said that weakness in the dollar is the key driver for precious metals.
Gold saving funds and gold exchange traded funds (ETFs) witnessed net inflows of Rs 864 crore in April amid uncertain economic environment in the wake of the second wave of Covid-19. Analysts expect the positive inflow to continue in the financial year 2021-22 as the precious metal remains an under-allocated asset in investor portfolios in uncertain times.
Gold futures on MCX were marginally down by 0.23 per cent or Rs 111 at Rs 48,515 per 10 grams. Silver futures were up by 0.63 per cent or Rs 450 to Rs 71,499 per kg.
“Gold prices traded higher on Monday with spot gold prices at COMEX trading near $1882 per ounce in the morning trade. The yellow metal continued upside after gaining for three consecutive weeks,” said Tapan Patel, Senior Analyst (Commodities), HDFC Securities.
In the spot market, highest purity gold was sold at Rs 48,553 while silver was priced at Rs 71,245 on Friday, according to the Indian Bullion and Jewellers Association.
“Gold prices rose on a weaker dollar while sell off in crypto currencies also boosted buying in safe haven assets. Traders and investors are betting against higher inflation worries which may support gold prices to trade up.”
Trading strategy
“We expect gold prices to trade sideways to up for the day with COMEX Spot gold support at $1860 and resistance at $1900 per ounce. MCX Gold June futures support lies at Rs. 48200 and resistance at Rs.48800 per 10 gram,” said Patel of HDFC Securities.
Global markets
Spot gold was up 0.1 per cent at $1,882.10 per ounce by 0050 GMT. Last week, gold prices hit their highest level since Jan 8 at $1,889.75.
Palladium eased 0.1 per cent to $2,780.54 per ounce, silver was steady at $27.52, while platinum edged 0.4 per cent higher to $1,171.64.
