Gold futures test Rs 48,600/10 gm, silver Rs 71,750/kg. Should you take positions?

MCX gold futures for June 4 delivery traded stayed positive through the morning session and were last seen quoting up 0.35 per cent at Rs 48,571 per 10 grams in the early hours of the evening session, which continues till 11:30 pm. The contract moved between Rs 48,368 and Rs 48,622 as against its previous close of Rs 48,404.

MCX silver futures for July 5 delivery were up 0.99 per cent at Rs 71,750 per kilogram, having risen to as high as Rs 71,780 earlier on Monday.

Optimism on the global economic recovery front continues to put pressure on bullion, say analysts.

“The Fed has kept its focus on attaining better employment data, although a few officials have begun lowering expectations for May jobs growth in the US as business hiring plans continue to outrun the supply of people able or willing to work,” said Navneet Damani, VP-Commodities Research, Motilal Oswal Financial Services.

In the international spot market, benchmark gold climbed as much as 0.31 per cent to $1,887.05 per ounce and silver 0.84 per cent to $27.80 per ounce. The yellow metal benchmark had last week touched $1,889.75 – the highest intraday level since January 8.

Back home, spot gold (22 carat) became dearer by Rs 95 to settle at Rs 48,015 per 10 grams in the national capital. Silver followed suit, rising by Rs 154 to Rs 70,998 per kilogram.

Weakness in the dollar – which makes gold and silver more attractive for those holding other currencies – supported precious metals but gains in domestic equities lured investors towards riskier assets.

The rupee edged lower to end at 72.96 against the dollar amid weakness in the US currency overseas. The dollar index — which gauges the greenback against six major peers — was last seen trading down 0.14 per cent at 89.882, close to its intraday low of 89.85. The yield on the benchmark 10-year US bond hovered near a one-week trough.

Dalal Street extended gains to a second straight day amid strong buying interest in financial stocks and heavyweights such as L&T and ITC. The S&P BSE Sensex index ended 111.42 points – or 0.22 per cent – higher at 50,651.90 and the broader NSE Nifty 50 benchmark settled at 15,197.70, up 22.40 points – or 0.15 per cent.

Typically, gains in equities boost the risk appetite of investors, denting the safe-haven appeal of precious metals.

Market participants keenly awaited US data on GDP and consumer confidence due this week.

How to trade gold & silver now

Damani expects MCX gold to move between Rs 48,400 and Rs 48,900 per 10 grams in the near term ($1,865-1,900 per ounce on Comex).

Manoj Kumar Jain, Director-Head of Commodity Research, Prithvi Finmart, expects both gold and silver to remain volatile this week, with the yellow metal seen holding its key support of $1,850 per troy ounce.

The MCX June contract has support at Rs 48,200-47,980 and resistance at Rs 48,650-48,800, said Jain. For silver, he sees support at Rs 70,400-69,900 and resistance at Rs 71,700-72,300 per kg.

Jain suggests buying MCX gold around Rs 48,200 for a target of Rs 48,650 with a stop loss at Rs 47,980.

Silver is looking strong after some profit booking and traders may take advantage of any dips to take fresh positions, said Kshitij Purohit, Lead Commodities and Currency, CapitalVia Global Research. An ideal range to buy MCX silver is Rs 71,200-71,000 for a target of Rs 74,500-76,500 this week with a stop loss at Rs 70,600.