Gold on a shaky wicket

Domestic gold prices better placed due to weaker rupee

Gold prices in the international market fell below the $1,150 mark last week.

But prices in the domestic market didn’t see much correction, thanks to a weak rupee.

Gold slid to $1,158/ounce, down 0.7 per cent for the week, with a surge in the dollar on the back of strong US jobs data. The dollar index crossed the 100-mark and ended the week at 100.33, up from the previous week’s 97.6.

The non-farm pay rolls data for February released on March 6 showed 2,95,000 jobs added against the market expectation of 2,30,000 jobs, which strengthened expectations for a US rate hike.

Silver and platinum prices too moved down sharply. Silver closed at $15.66/ounce, down 1.5 per cent. Platinum closed at $1118/ounce, down by 3.7 per cent.

Outflows from the SPDR Gold Trust, the world’s largest gold fund, continued. The fund reported holdings of 750.67 tonnes, down from 756.32 tonnes last week as investors dumped the yellow metal and queued up for dollar.

Cues to watch

The US dollar is on a song. If the Fed Reserve signals a rate hike in its meeting this week, a fresh bout of selling may be seen in gold. With the ECB having kicked off a large bond buying programme, the dollar is receiving support while the euro is losing steam. This week is packed with key data releases in the US.

The data on industrial production is slated for release on Monday. On Tuesday and Wednesday we have the FOMC meeting and the release of the monetary policy statement.

Housing starts data is also scheduled for release on Tuesday. The weekly jobless claims data will be released on March 19.

Latest numbers showing US retail sales falling for the third month in a row in February and producer prices falling 0.5 per cent from January, against hopes of a 0.3 per cent increase, have, however, tempered rate hike fears a bit.

Last week, gold prices hit our downward target of $1,150 and went on to hit $1,147 an ounce. With the $1,150 support broken, this week may see prices slipping to $1,140 or even the 2014 low of $1,132. Even if prices find support at the current levels of $1,158, a sideways move in the $1,150-$1,180 range for some time may be on the cards.

Indian markets

Gold prices in India have held up fairly well amid global turmoil. This is thanks to a weak rupee. The MCX Gold (₹25,890) contract was down 0.4 per cent last week. The contract may move up from here to ₹26,500 if it crosses resistance at ₹26,000. On the downside, the first support is at ₹25,560 and the next at ₹25,200.

The MCX Silver (₹35,533) contract lost 1.8 per cent last week. There is a strong resistance around ₹36,500-₹37,000 levels. Only if this is crossed will it make further headway.

From the current levels, the contract will face its first resistance at ₹36,000. On the downside, the support is at ₹34,800 and ₹32,600. Overall, Indian gold investors may not lose much money in the short term even if global gold prices continue southwards.

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