Gold trades flat; analysts expect upside move in stimulus hopes

NEW DELHI: Gold futures in the domestic market traded flat in the morning trade on Monday after witnessing profit booking in the previous session, as hopes of a massive stimulus bolstered the prospects for precious metals.

The Joe Biden administration and Democratic and Republican lawmakers discussing a new $1.9 trillion coronavirus relief package agreed on Sunday that the most important priority should be producing and efficiently distributing a vaccine. Gold is considered a hedge against inflation, likely from widespread stimulus.

Gold futures on MCX were down 0.05 per cent or Rs 24 at Rs 49,116 per 10 grams. Silver futures added 0.39 per cent or Rs 258 to Rs 66,900 per kg.

“COMEX gold trades marginally lower near $1,854/oz after a 0.5 per cent decline in the previous session. Gold is pressurized by recovery in the US dollar index from recent lows, continuing ETF outflows and lack of cues from major central banks. However, supporting the price is hopes of additional US stimulus, rising virus cases, mixed economic data from major economies and US-China tensions,” said Ravindra Rao, VP- Head Commodity Research at Kotak Securities.

In the spot market, snapping a three-day winning streak, gold prices on Friday slipped by Rs 263 to Rs 48,861 per 10 grams in the national capital, due to a weak trend in the international market, according to HDFC Securities. Silver prices also declined by Rs 806 to Rs 66,032 per kilogram.


Trading strategy
“Gold may remain choppy unless there are fresh triggers however general bias may be on the upside on US stimulus expectations,” said Rao.

Global markets
Gold prices rose on Monday, recovering from a sharp decline in the previous session, as investors hoped that a massive economic stimulus would be passed soon in the United States to revive the world's largest economy.

Spot gold rose 0.3 per cent to $1,858.57 per ounce by 0039 GMT, having slipped 0.9 per cent in the previous session. US gold futures were little changed at $1,856.60.

Demand for physical gold picked up last week as the approaching Chinese New Year encouraged buyers in China and Singapore.

Speculators reduced their bullish positions in COMEX gold and silver contracts in the week to Jan. 19, data showed. Holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, eased 0.07 per cent to 1,173.25 tonnes on Friday. Silver gained 0.9 per cent to $25.61 an ounce, platinum rose 0.6 per cent to $1,105.06, and palladium added 0.1 per cent to $2,355.83.