Gold prices hit a high of $1,346 an ounce mid-last week as the US claims for jobless benefits rose and China’s manufacturing sector PMI contracted. Weakness in dollar also supported gold prices. The metal has rallied 7.8 per cent in July, its highest monthly gain since January 2012.

Investment demand for the metal, however, remained weak with holdings of the US SPDR Gold trust dropping 2.7 tonnes in the week to 929.76 tonnes. In the domestic market, despite rupee making modest gains at 59.04 from 59.35 levels, gold price increased to Rs 27,643/10 gram from Rs 26,800. Gold futures for August delivery in MCX gained 2.7 per cent during the week at Rs 27,405.

The slew of measures by the Government to check imports of the yellow metal might create a supply shortage in the short-run and see the metal rule at a premium over international prices.

Silver made a strong gain and touched $20.5 an ounce on Monday from the previous week’s close of $19.5. However, it couldn’t sustain there and dropped to close the week at $20. This is a significant support for the metal with the 20-day moving average crossing exactly at this point. If price sustains here for one or more sessions, it can move up strongly.

Data points for next week

The world’s largest silver backed exchange traded fund, iShares Silver Trust, saw holding rise by 144 tonnes to 10,428. In MCX, silver contract for September delivery, however, rose by 1 per cent to close at Rs 40,763.

Bullion traders will be closely watching developments at the US Federal Reserve’s policy meeting on Tuesday and Wednesday. It is likely that the Fed will make moves in the direction of tapering stimulus by reducing the pace of treasury purchases. Market will take cues also from the second quarter GDP numbers that will be released on Wednesday and the weekly jobless claims on Thursday.

Market expectations are that the Government will see a 1.1 per cent growth in GDP, down from 1.8 per cent in the March quarter. This, if happens, will see gold bulls coming back in action.

The figures from the labour market that will be released on Friday, will also be key. After rising by 1.95 lakh in June, US non-farm pay roll employment is expected to rise in July and this may hurt price of the yellow metal.

MCX gold future is in a medium-term uptrend making higher peaks and higher troughs since July. However, it has a strong resistance at Rs 28,000 levels. The price might struggle to move above this mark just yet. This week price might move sideways or correct towards Rs 26,300 level.

If this level is breached, next halt can be at Rs 25,900.

Silver contract for September delivery has been on a sideways trend since mid-June. This week, silver may hit Rs 39,800-40,000 levels. From there it may reverse if there is a strong buying. On the way up, the first resistance is at Rs 42,400, its recent high, and the second resistance is at Rs 42,800.

>rajalakshmi.sivam@thehindu.co.in

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