Crude oil prices touch four-week highs; silver outperforms gold, silver support at Rs 68,800 level

Bulls were able to defend the $1900 mark in yellow metal; the latest bounce in gold was mainly supported by the softer US jobs market data. The job data reported an addition of 209,000 nonfarm payrolls for the month of June, which was lower than the market estimate of 225,000. On the other side, silver has outperformed gold prices in the prior week. In the energy pack, Crude oil prices have extended their gains and reached four-week highs. The recent rally in crude was mainly supported by supply concerns. 

While Natural gas prices have lost their previous gains as the U.S. weather forecast report suggests a weak demand outlook, other commodities such as lead and zinc fell between 1.0% and 2.5%, and copper prices managed to close with a modest gain last week.

Bottom-fishing action was seen in the bullion complex by market participants at the end of the prior week; the rally from the lower level was mainly backed by a softer U.S. Jobs report and a weaker greenback. For the week, Comex gold settled marginally higher by 0.30%. In the meantime, the latest data showed that China continued to increase its gold holdings for the eighth straight month, with economic and geopolitical concerns, as well as a desire to diversify away from the US currency, driving the purchases, which also favored the bulls during the previous week. On the other hand, Money managers have increased their bullish gold bets by 12,733 net-long positions to 99,205, weekly CFTC data on futures and options shows.

Silver September MCX Futures closed at the Rs 71,310 mark and Comex Silver closed around the $23.08 mark, with a rise of 1.83% and 1.38%, respectively. The dollar index closed below the 102-mark, and this is the first weekly decline in the greenback seen after two consecutive positive weekly closings.

Going forward, we expect Investors will have a keen eye on upcoming FOMC member speeches, along with inflation numbers from China and the U.S. Such a data pack could offer further momentum to the dollar index and bullion pack. On the other hand, recent weakness in the rupee has also supported domestic bullion prices to rally higher compared to the global market trend.

We believe that for this week, the recent weakness in the greenback is expected to support the bullion market for the short term, and Comex Gold could move in a range of $1900 to $1960 with a moderately positive bias. Comex Silver has immediate support at $22.05, followed by $21.45, and resistance at $23.41 (100 DEMA) and then $24.25 per ounce.

Back home, MCX Gold August contact could move in the range of Rs. 58,120 to Rs. 59,560. MCX Silver September contract has resistance at Rs 73,025 and support at Rs 68,800 for this week.

(Saumil Gandhi, Senior Analyst (Commodities), HDFC Securities. Views expressed are the author’s own. Please consult your financial advisor before investing.)