India's Q1 gold demand bounces back; demand up 37% at 140 tonnes: WGC
India's Q1 gold demand bounces back; demand up 37% at 140 tonnes: WGC

Gold and silver prices dipped on the occasion of Akshaya Tritiya today (May 14). On the Multi-Commodity Exchange (MCX), June gold contracts dipped 0.15 percent to Rs 47,365 for 10 grams at 9.55 AM on Friday. July silver future were trading lower by 0.11 percent at Rs 70,399 a kilogram.

MCX gold future witnessed sideways to bullish movement during the April and May month so far amid reports of second wave and third wave of COVID-19 in India and the European countries. Falling bond yields and US dollar index has given strength to the global gold prices. Simultaneously, daily rising prices in India and shortage of medical services and hospital occupancy has also supported the prices in the past few weeks. Worries regarding the third wave of COVID-19 could possibly affect the children in India and that has increased tensions in the Indian market.

By May 13, MCX Gold futures closed at Rs 47,438 per 10 grams, higher by 6.27 percent compared to Rs 44,637 per 10 grams reported on March 31.

Ravindra Rao, CMT , EPAT, VP-Head Commodity Research, Kotak Securities said, MCX GOLD June future witnessed a quick recovery after testing the key support of 20 day EMA at 47230. Price also got support from the rising trend line near 47,200. But it seems that the bullish momentum has paused as a dip in the momentum indicator suggests a phase of sideways consolidation.

"The RSI has slid below 60 and moving towards the mid zone of 50(54) suggesting sideways trend in gold. Support for the day is pegged near 47,200 and strong support is near 46,900.Resistance can be seen near 48000 followed by 48,400. So for the day price is expected to move in the band of 47,200-48,000. Only a close below 46,900 would change the trend to neutral," he said.

MCX SILVER May future witnessed a sharp decline as price breached the 5 day EMA at 70,950. According to Rao of Kotak Securities, the next support for price exists around 6,9800(20 Day EMA), which could be the key support for silver futures. "On the upside 72,200-72,650 holds the key resistance zone. Momentum oscillator RSI has also erased its gains and is moving towards the mid zone(50) , suggesting a sideways phase in the price trend. To conclude we expect silver to trade with a sideways bias with strong support near 69800 and resistance near 72,200. However failure to hold above 69,800 would change the trend to neutral," Rao added.

Gold futures to trade bullish

A report by Choice Broking said: Looking forward for the coming months, it expects international and domestic gold futures to trade bullish with western economies are showcasing major revival due to faster vaccination process; especially in the European Union and the United States. Moreover, expectancy of higher Gold Eagle coin sales in the US market is more likely limit major downtrend in prices.

As per the US Mint, Eagle gold coin sales in the 2021 (January-April) have been reported at 643,000 ounces, higher compared to 333,500 ounces of the consecutive period of the last year.

Online sales pick up

The second wave of COVID-19 has weighed on the industrial and jewellery demand. However, the spot traders and jewellers have increased their online sales of gold jewellery to limit extreme slump in domestic sales. The upcoming marriage season in June-August months is expected to improve the demand for gold with vaccination process picking up pace in India. Gold ETFs continue to receive steady inflows from investors, as more and more are realising the need to add gold in the portfolio as a diversifier.

In April, the category saw a net inflow of Rs 680.15 crore, higher than March's total inflow of Rs 662.45 crore. From January 2020 to April 2021, this category receied a net inflow of Rs 9,089.63 crore. We are estimating bullish trend in the MCX Gold Futures and prices are likely to move towards Rs 50,000 and Rs 52,000 levels by the next one to two months respectively.

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