Gold prices to trade higher this week as tensions escalate between Russia & Ukraine

By Tapan Patel

Commodity prices traded higher with most of the commodities in the non-agro segment rallied during the week on global supply worries with added risk premium. Bullion prices continued to soar on geopolitical risk while crude oil prices rallied to the highest levels of 2008 on tight supplies over Russia sanctions. Base metals kept firm trading on strong demand and lower inventory levels with Nickel and Aluminium soared on supply disruption fear from Russia. 

Gold prices traded higher during the week with spot gold prices at COMEX rose by more than 4% to $1970.70 per ounce for the week. Gold April futures at MCX ended 4.66% up at Rs. 52559 per 10 gram along with sharp rupee depreciation. The spot rupee fell by 1.16% at 76.17 against the dollar for the week. Gold ETF holdings witnessed inflows as holdings at SPDR Gold Shares rose to 1054 tonnes from previous week’s 1027 tonnes as geopolitical risk increased investment into safe haven asset. The CFTC data showed that money managers have increased their net long positions by 7121 lots in last week.

Silver prices rallied with spot silver prices at COMEX rose by 5.88% to $25.70 per ounce for the week. MCX Silver March futures surged by 6% to Rs 67868 per KG for the week. Silver prices outperformed gold for the week on higher demand outlook for industrial metals and lower supply worries along with safe-haven buying. 

Gold prices surged above $2000 per ounce on Monday extending gains on heightened tensions after Russia captures largest nuclear plant of Ukraine. The geopolitical risk premium over the Russia-Ukraine conflict and global inflation worries may continue to boost buying in gold. The global supply shock in commodities may keep inflation levels high with crude oil trading above $120 per barrel. Gold prices extended gains after US payroll numbers declined on Friday offering some respite from strong inflationary pressures as the Federal Reserve gets set to raise interest rates. The dollar index rose by more than 2% on safe-haven buying along with gold on global uncertainty.  The escalated geopolitical risk may continue to support gold prices in near term while market players may also watch for US FED action over the stance of raising interest rates. 

We expect gold prices to trade up in the coming week with COMEX spot gold resistance at $2050 per ounce and support at $1970 per ounce. At MCX, Gold April prices have near term resistance at Rs 54600 per 10 grams and support at Rs 52800 per 10 gram. COMEX Spot silver has near term resistance at $26.50 per ounce with support at $25.20 per ounce. MCX Silver May has important resistance at Rs 72800 per KG and support at Rs 68000 per KG.

(Tapan Patel is a Senior Analyst (Commodities) at HDFC Securities. Views expressed are the author’s own.)

from The Financial Express https://ift.tt/x0saCkH