Gold & Silver

Omicron, lockdown fears, Fed rate hike make a volatile week for gold

Rutam V Vora | | Updated on: Nov 27, 2021
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India spot gold loses ₹1,300 before recovering by ₹ 900 amidst renewed panic

A new coronavirus variant B.1.1.529 (named as Omicron by WHO), fears of a return of lockdowns and panic-stricken sell-off in global equities has created possibilities for an upside in the yellow metal as haven demand revives.

The yellow metal opened the week with a downtrend amidst US Federal Reserve's decision to accelerate the withdrawal of stimulus to address inflation concerns. Gold has fallen from the intra-day peak of $1850 an ounce (oz is equal to approx 28.3 grams) on Monday to the lows of $1777 on November 24. However, as soon as the news on new and highly infectious coronavirus variant from South Africa surfaced, gold recovered by $39 to intra-day high of $1816 on Friday.

India's spot gold prices started heading south tracking international weakness in the yellow metal coupled with waning festive demand. After opening the week at ₹48,834 per 10 grams on November 22, spot gold as quoted by IBJA slipped to ₹47,584 on November 24. But downside was contained as gold recovered from the lows to quote at Rs 48,466 on Friday.

Fast Four Bullion

1. Gold up amidst global uncertainty and fears

The slide in CME gold December Futures was contained at $1792.3, as it gained from the prior settle rate of $1784. Gold's losing streak for past five sessions, was contained following the reports of new coronavirus variant found in South Africa and subsequent announcement by the WHO terming it a "variant of concern".

Commenting on the gold movement, Ajay Kedia from Kedia Advisory, said, "There were inflation concerns earlier this month which triggered a rally of $ 100 in gold prices in a short span. But following the buzz around interest rate hike by US Fed, we saw gold slipping below the highs of $1870 to hit the lows of $1780. Now the new variant is a bigger concern, which supported gold and pushed it up to $1815-1816."

2. Volatile days approaching for Gold?

Analysts expect gold to stay firm following the renewed COVID-19 concerns. But the government moves on accelerated withdrawal of stimulus will put downward pressure on the precious metals.

Volatility is expected in the yellow metal for the next two months, experts believe while closely observing the developing situation on the new variant and how the countries react with restrictions. Analysts expect gold to face resistance at $1835 levels, which is about 2% higher than the current levels.

Enhanced restrictions, lockdowns and the subsequent impacts on the economic activities would further fuel the demand for gold as safe-haven asset triggering a fresh upside. While downside risk remains as countries rush to address inflation worries.

3. India spot gold firms up

India spot gold prices resumed uptrend after revival in physical demand on softened prices, and weaker rupee and global concerns.

The India Bullion and Jewellers Association (IBJA) quoted the gold (999 purity) at ₹48,466 per 10 grams for November 26, higher by about ₹800 over previous settle. Silver prices quoted at ₹63,612 per kg, higher by about ₹300 over prior settle.

In futures, MCX gold December futures were last quoted at ₹47,640 on Friday with gains of Rs 219 over previous close. Bur MCX silver lost by over 1.6% or ₹1,031 on Friday to end the week at ₹61,119.

4. Outlook

Analysts expect gold to hover in a broad range of ₹47,000 - ₹50,000 with analysts indicating fresh buying opportunity between ₹46,500-47,000. While the next fortnight is to be watched carefully on the spread of the new coronavirus variant to other countries and the subsequent restrictions including the lockdowns.

Stricter restrictions would mean firmer gold, indicated analysts for the gold price in the next few days.

Published on November 27, 2021

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