Gold prices tanked Rs 757 to Rs 50,287 per 10 gram in the Mumbai retail market on rupee appreciation against the dollar and strength in equity markets.

The precious metal witnessed a roller coaster movement earlier in the day after US President Donald Trump’s surprise move to halt stimulus talks until after the election next month. Trump later asked Congress to extend the $25 billion in new payroll assistance to US passenger airlines.

Bullion prices found support after a gloomy outlook painted by the US Federal Reserve Chair Jerome Powell, who warned that the US economic recovery remains far from complete and could still slip into a downward spiral if coronavirus is not effectively controlled and growth sustained.

US and European central bankers called for renewed government spending to support families and businesses as the battle against the coronavirus triggered recession enters a new critical phase, offering some support to gold at lower levels.

Market participants will keep an eye on minutes of the Federal Open Market Committee (FOMC) scheduled later in the day, wherein comments from the fed governor will be important to watch for.

The rate of 10 gram 18, 22 and 24-carat gold in Mumbai was Rs 37,715, Rs 46,063 and Rs 50,287, respectively, plus 3 percent GST. 

Spot gold was trading up $10.10 at $1,888.23 an ounce at 12:05 GMT in London trading.

Gold holdings in SPDR ETF fell 4.1 tonne to 1271.51 tonne. 

MCX iCOMDEX Bullion Index inched lower 145.05 points, or 0.94 percent, at 15,285.24 at 17:36 hours. The index tracks the real-time performance of MCX Gold and MCX Silver futures.

Navneet Damani, Vice President, Motilal Oswal, said the broader trend on the COMEX could be in the range of $1,860-1,900 per troy ounce. “On the domestic front, prices could hover between Rs 49,850 and Rs 50,350 per 0 gm.”

Ravindra Rao, VP-Head Commodity Research at Kotak Securities, too sees gold remaining under pressure as market players react to the abrupt halt in US stimulus talks and seek safety in the dollar. However, he was quick to add that a sharp decline is unlikely.

The gold-to-silver ratio currently stands at 85.41 to 1, which means the amount of silver required to buy one ounce of gold. The decrease in ratio indicates that silver has outperformed gold.

Silver prices plunged Rs 2,240 to Rs 58,872 per kg from its closing on October 6.

In the futures market, the gold rate touched an intraday high of Rs 50,361 and a low of Rs 49,920 on the Multi-Commodity Exchange (MCX). For the December series, the yellow metal touched a low of Rs 48,384 and a high of Rs 56,379.

Gold futures for December delivery slipped Rs 440, or 0.87 percent, at Rs 50,086 per 10 gram in evening trade on a business turnover of 15,297 lots. The same for February dropped Rs 701, or 1.38 percent, at Rs 50,148 on a business turnover of 680 lots.

The value of the December and February’s contracts traded so far is Rs 3,677.32 crore and Rs 52.22 crore, respectively.

Similarly, Gold Mini contract for November edged lower by Rs 424, or 0.84 percent, to Rs 50,193 on a business turnover of 11,582 lots.

Trading strategy

Sriram Iyer, Senior Research Analyst at Reliance Securities:

Domestic gold and silver prices are still trading weak in afternoon trade, tracking weak COMEX futures. Technically, MCX Gold October contract is near its support zone (100 Daily Moving Average) of around Rs 50,200 levels from where a bounced back movement can be expected. Overall sentiment remain bearish. Downside support stands at Rs 49,900-49,500 levels. Resistance is at Rs 50,500-50,750 levels.

Tapan Patel, Senior Analyst (Commodities), HDFC Securities:

We expect bullion prices to trade sideways to up for the day with COMEX gold resistance at $1,920 and support at $1,880 per troy ounce. Support for MCX Gold October lies at Rs 49,900 with resistance at Rs 50,600.

Anuj Gupta, DVP – Commodities and Currencies Research, Angel Broking:

On the MCX, gold prices are expected to trade lower on October 7. Traders can sell gold at Rs 50,300 levels, with a stop loss at Rs 50,700 levels, for a target of Rs 49,700 levels.