Domestic gold prices edged lower on Tuesday amid a rebound in Indian equities and weakness in the dollar overseas, making the precious metal more attractive for holders of other currencies. Investors and analysts keenly awaited updates from the US central bank's policy meeting due this week for cues on tapering of its massive stimulus and tightening of an ultra-loose monetary policy.
At 9:34 am, Multi Commodity Exchange (MCX) gold futures for October delivery traded Rs 88 or 0.2 percent lower at Rs 46,190 per 10 grams compared with their previous close of Rs 46,278 per 10 grams. MCX silver (December) futures were at Rs 59,605 per kilogram, nearly unchanged from their previous close of Rs 59,609 per kg.
Gains on Dalal Street despite weakness across other Asian markets maintained the safe-haven appeal of the yellow metal. Sensex and Nifty50 benchmarks rose half a percent each in morning deals led by buying interest in IT, metal, consumer goods and oil & gas shares. Catch live market updates here
Globally, gold and silver rates made negligible movements as investors adopted a risk-averse stance amid caution ahead of the Federal Reserve’s policy meeting where the US central bank is expected to provide cues on when it will begin tapering its asset purchases.
Spot gold was steady at $1,763.6 per ounce. US futures of the yellow metal were flat at $1,764.4 an ounce. Silver edged up 0.1 percent to $22.26 per ounce, bouncing back from a nine-month low of $22.01 on the previous day.
Bullion is often considered as a hedge against inflation and currency debasement likely resulting from the widespread stimulus. A hawkish move by the Fed would diminish gold’s appeal, while an eventual interest rate hike would also raise the opportunity cost of holding the non-interest bearing asset.
The dollar index -- which gauges the greenback against six other currencies -- was near its day's low, trading down 0.1 percent. On Monday, the rupee depreciated by 26 paise to close at a nearly four-week low of 73.74 against the dollar.
What analysts say
"Both the precious metals are expected to remain volatile on Tuesday as safe-haven buying is supported by pressure in global equities. The market is hoping the Federal Reserve could delay its tapering after the Evergrande matter comes into the limelight," said Manoj Kumar Jain, Director-Head of Commodity Research, Prithvi Finmart.
He sees support for MCX gold futures at Rs 46,050-45,880, and resistance at Rs 46,480-46,660. For the white metal, Jain has pegged support at Rs 59,100-58,800 and resistance at Rs 60,100-60,700 levels.
"Market participants hope to gain more clarity as to the timeline of the Federal Reserve's tapering of stimulus as it will begin to reduce its monthly asset purchases of $120 billion. Precious metals are light before the FOMC meeting," said Sandeep Matta, Founder, TRADEIT Investment Advisor.
Should you take positions now?
Jain suggests buying gold futures around Rs 46,100 for a target of Rs 46,550 with a stop loss at Rs 45,880, and silver around Rs 59,200 for a target of Rs 60,300 with a stop loss at Rs 58,700.
Matta sees Rs 46,178 as a key level for gold futures. He sees a buy zone above Rs 46,180 for a target of Rs 46,450-46,650, and a sell zone below Rs 46,170 for a target of Rs 46,060-45,900.