Gold & Silver - Weekly Wrap - Oct 9, 2021 - Mr. Sriram Iyer, Senior Research Analyst at Reliance Securities
2021-10-10 16:22:00 (Time Zone: IST)
International gold and silver prices witnessed range bound price action this week.
U.S. employers added just 194,000 jobs in September, well below expectations. However, the unemployment rate dropping to an 18-month low of 4.8%.
But there were signs of labour market tightness. Wage gains accelerated further, permanent job losses decreased and fewer people were experiencing long spells of unemployment.
Prices did witness a jump after the report, however as investors came to terms with the possibility the Federal Reserve could still announce something this year, markets gave up most of its gains.
The dollar ended flat this week, but the bond yields ended above the 1.6% level, first time since the mid-week of May and a rebound in the equity markets kept upside capped.
Upside was also capped as physical demand remained limited this week with China remaining away for the most part of the week.
Additionally, physical gold rates in India flipped to a discount for the first time in over two months this week as a rise in local prices curbed demand.
Dealers in India offered discounts of up to $2 an ounce over official domestic prices down from last week's premium of $4.
Domestic gold and silver rose this primarily on the back of a weaker Rupee. However, higher prices prompted jewellers to postpone purchases.
Meanwhile, data from RBI showed that gold assets rose marginally to $37.56 billion from $37.43 billion.
Gold prices could not even hold on to gains following the 2nd month of disappointing U.S. labour market data.
The market is suffering because investors remain focused on U.S. monetary policy.
Although September's nonfarm payrolls missed expectations, the markets are pricing in that the Federal Reserve is on track to shift its monetary policy, and that will continue to weigh on gold prices.
Looking ahead, markets could remain volatile ahead of the Fed meeting in the first week of November.
On the macro economic front, U.S. CPI and retail sales data will the major trigger for prices.
However, rising inflation is not providing any support for gold because it is leading market players to price in more aggressive action from central banks. The CME Fed Watch Tool already shows that markets are pricing in a small chance of a rate hike by June 2022.
Technically, LBMA spot gold managed to hit a two-week high briefly, it could not break resistance at $1780. At the same time, prices did find support at the 100-day moving average at $1730. So, range for the coming week will be $1730-$1780.
MCX Gold December recovered this week and ended above the 100-day moving average at 46590 which remains a key support now and a sustained trade above could extend the bullish momentum next week. However, prices closed marginally below the 50-day moving average at 47157, which will remain as a major hurdle for the markets in the coming week.
On the silver side of things, LBMA Silver range for the coming week will be $22.172-23.205. the pivotal level to watch out for is $22.85. A trade below will continue pressurize prices and vice versa.
Domestically, MCX Silver December important resistance is at 64095 which is the 50-day moving average. Support is 59583, which is the 100-day moving average. Markets could remain within the range and a needs a breakout on either side to witness new ranges.
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