Gold prices dropped by Rs 358 to Rs 48,969 per 10 gram in the Mumbai retail market on a firm dollar and sharp sell-off on Friday in the international market. The yellow metal had declined Rs 1,094 or 2.17 percent last week in the domestic market.

The rate of 10 gram 22-carat gold in Mumbai was Rs 44,856 plus 3 percent GST, while 24-carat 10 gram was Rs 48,969 plus GST. The 18-carat gold quoted at Rs 36,727 plus GST in the retail market.

China’s GDP grew by 6.5 percent in the fourth quarter against 4.9 percent growth in the third quarter. The country’s GDP grew 2.3 percent in 2020 on stronger demand at home and abroad and policy stimulus

Hedge Funds and money managers reduced their bullish positions in COMEX gold and silver contracts by 46,859 contracts to 105,270 and by 4,238 contracts to 43,395 respective for the week to January 12, according to US CFTC data.

The stronger US currency made the dollar-denominated gold less desirable for other currency holders.

The economic calendar for the day is fairly light although, market participants will keep an eye on Joe Biden’s speech on January 20th and Preliminary Manufacturing and Service PMI data scheduled later in the day which could trigger in some volatility.

Gold holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund fell by 4.48 ton to 1,177.63 tonnes on increased ETF outflow.

Spot gold was slightly up by $2.97 to $1,831.46 an ounce at 1230 GMT in London trading.

MCX Bulldesk was up 16 points, or 0.11 percent, at 15,157 at 18:00. The index tracks the real-time performance of MCX Gold and MCX Silver futures.

Navneet Damani, Vice President, Motilal Oswal said, “Gold prices dropped to their lowest in 1-1/2 months in the early morning session, as a stronger US dollar made bullion expensive for other currency holders, despite expectations of a large COVID-19 relief package in the United States. The US dollar strengthened to its highest in four weeks against rival currencies. US President-elect Joe Biden said on Friday he wants 100 million COVID-19 vaccine shots during his first 100 days in office, a day after unveiling a $1.9 trillion stimulus package proposal to jump-start the economy.”

The broader trend on COMEX could be in the range of $1800- 1865 and on domestic front prices could hover in the range of Rs 49,120- 48,300.

“COMEX gold trades flat near $1830/oz after Gold is pressurised by recent gains in US dollar index on the back of safe-haven buying. However, supporting price is mixed economic data from major economies, rising virus cases, Fed’s support for loose monetary policy and the possibility of additional US stimulus. ETF inflows late last week also indicated some pick up in investor buying. Gold may remain under pressure with US dollar attempting a pullback from multiyear low however price may hold near the $1800/oz level,” said Ravindra Rao, VP- Head Commodity Research at Kotak Securities.

The gold/silver ratio currently stands at 75.45 to 1, which means the number of silver ounces required to buy one ounce of gold.

Silver prices plummet Rs 525 to Rs 64,895 per kg from its closing on January 15.

In the futures market, the gold rate touched an intraday high of Rs 48,995 and an intraday low of Rs 48,608 on the Multi-Commodity Exchange (MCX). For the February series, the yellow metal touched a low of Rs 41,560 and a high of Rs 57,100.

Gold futures for February delivery gained Rs 101, or 0.21 percent, at Rs 48,803 per 10 gram in evening trade on a business turnover of 7,422 lots. The same for April rose Rs 135, or 0.28 percent, at Rs 48,850 on a business turnover of 8,509 lots.

The value of the February and April’s contracts traded so far is Rs 2,256.55 crore and Rs 335.97 crore, respectively.

Similarly, Gold Mini contract for February jumped Rs 91, or 0.19 percent at Rs 48,836 on a business turnover of 15,715 lots.

Trading Strategy

Tapan Patel- Senior Analyst (Commodities), HDFC Securities

Gold prices witnessed short recovery after falling in the morning with a rally in the dollar index. Gold prices have kept lower trading range on dollar buying while US bond yields remained fluctuated near 10 months highs. The US markets are closed today on account of “Martin Luther King Holiday” which may keep gold prices in range.

We expect gold prices to trade sideways to down with COMEX gold resistance at $1,850, support at $1,810. MCX Gold February support lies at Rs 48,600 with resistance at Rs 49,100.