Gold prices hit 11-month low, tumble 21% from all-time highs; watch these support levels in near term By: Surbhi Jain | March 5, 2021 11:03 AM Gold prices in India extended losses on Friday on the account of the strengthening of the Indian rupee against the US Dollar.

 

One of the major reasons behind a fall in gold prices is rising US bond yields, which has appreciated to 1.57 per cent. Image: Reuters

Gold prices extended losses on Friday on the account of the strengthening of the Indian rupee against the US Dollar. On MCX, gold April futures were trading Rs 317 or 0.71 per cent down at Rs 44,224 per 10 gram. On the other hand, silver May futures tumbled Rs 407 or 0.62 per cent to Rs 65,514 per kg on the Multi Commodity Exchange. MCX gold is likely to end on a bearish note for the third straight week, as the yellow metal prices have already declined over 3 per cent on a week-on-week basis, says Jigar Trivedi, Fundamental Research Analyst, Anand Rathi Shares and Stock Brokers. Moreover, holdings of the world’s largest gold-backed exchange-traded fund (ETF), SPDR Gold Trust, have also plunged for the 13th consecutive session.

One of the major reasons behind a fall in gold prices is rising US bond yields, which has appreciated to 1.57 per cent after Federal Reserve Chair Jerome Powell disappointed investors with his view on a surge in yields that pushed up the dollar and bond yields. Powell repeated his pledge to keep credit loose and said although the rise in yields was ‘notable’, he did not consider it a ‘disorderly’ move. Trivedi also added that the focus will shift to US non-farm payrolls for February along with the unemployment rate. “The dollar index and 10-Year bond yield are new entrants in the focus list. The yellow metal is likely to stay under pressure since sentiment is weak in bullion space amid sharp rise in dollar index and bond yield in the US,” he added.

Following a nearly 30 per cent rally in MCX gold price in 2020, the yellow metal has been witnessing extreme pressure. Indian share market volatility and rising bond yields have pushed down the gold prices by Rs 11,967 per 10 gram or 21.29 per cent from a record high of Rs 56,191 per 10 grams hit in August 2020. While on a year-to-date (YTD) basis, gold has plunged Rs 5,952 or 11.86 per cent. Looking at the sentiment, Bhavik Patel, Senior Technical Research Analyst, Tradebulls Securities is still bearish in short to medium term and expects short bounce back from Rs 43,800 as gold is in the oversold region (RSI 14 is trading at 25 on daily scale).

Bhavik Patel told Financial Express Online that historically gold has bounced back from RSI 14 whenever it has traded around 30 level and currently it is trading at 25, which suggests that it will bounce in short-term.

Following the dovish comment of Fed chairman Jerome Powell, the US bond yield climbed sharply. Treasury yields have risen more than 60 basis points (bps) in the last few days which has impacted gold’s status as a hedge against inflation. Kshitij Purohit, Lead Commodities & Currency at CapitalVia Global Research Limited, told Financial Express Online that for the short-term target, support is near April month low of 43600. RSI is hovering near 27 and below the level of 30, it is in oversold territory. “On the Comex, $1660-1680 is a strong support zone. Prices may come to this level in the short term. While in the medium-term, if it breaks below Rs 43,600, it could come to Rs 42,500 levels on the MCX,” he added.

Where will MCX gold go in near-to medium term?

Jigar Trivedi from Anand Rathi Shares and Stock Brokers, says that MCX gold may find support near Rs 43,900-43,600 in the short term. “We recommend to short on every bounce,” he said. Positionally, for investors Trivedi suggested that these are the best levels to start accumulation as gold has already fallen by 21 per cent from an all time high of Rs 56,191 per 10 gram.

While Bhavik Patel from Tradebulls Securities said now that Rs 44,500 is breached, levels of 43,300-43,000 are open for gold. “We believe gold might test those levels so in the short term we are bearish with any bounce opportunity to create fresh short positions,” Patel said. He also added that trend reversal may only come above Rs 47,000 per 10 gram in MCX.

(The views and investment tips in this story are expressed by the respective experts of research and brokerage firm. Financial Express Online does not bear any responsibility for their advice. Please consult your investment advisor before investing.)