Gold, Silver Weekly Outlook: MCX Gold Seen At Rs 66,500 Per 10 Grms; 1Kg Silver To Get Cheaper Than Rs 80,000?

After experiencing a weekly loss due to a sharp cut in customs duty of gold and silver, MCX gold and silver is likely to continue its volatile trend in the trading week from July 29 to August 2nd as well, with support from Fed rate cut bets. Brokerage SMC Global Securities expects MCX gold to stay near the 66,500 mark, while 1 kg silver price has the probability to slip under Rs 80,000.

Currently, on July 29, MCX gold futures with an August expiry are holding near the Rs 68,500 mark, and silver with a September expiry is around Rs 81,950 levels.

Last week, gold prices witnessed eye-bulging declines with MCX gold nosediving by nearly 6% on July 23, the day of India's Union Budget for FY25. And the volatility extended further.

Due to the latest weekly loss, YTD, the gains have been squeezed to now 10.8%. Before the Budget, MCX gold outperformed with gains of 18% compared to 24K gold price in retail stores and Sensex which saw gains of 16% and 11.4%.

The main reason for such frenzy destruction of gold was that traders did not appreciate the unexpected steep cut in customs duty on gold. Further, as per the report, gold financiers were also not pleased as the move would pull down the value of gold and further drag their loan-to-value (LTV) ratios lower.

As per SMC Global Securities, the week was historic for gold and silver, with dramatic price movements. In a significant move during the Union Budget 2024, the import duty on gold and silver was reduced from 15% to 6%. This led to a more than 5% decline in their prices on the same day.

It added that gold experienced a weekly loss, despite firming on Friday ahead of a key U.S. inflation reading that could provide more cues on when the Federal Reserve might cut interest rates.

Gold Weekly Outlook From July 29-August 2:

SMC's Wise Money report said the precious metal is currently in a cool-off period before potentially rising in the last quarter of this year. Market focus on Friday will be on the June U.S. (PCE) data, the Federal Reserve's favoured measure of inflation. Data showed that the U.S. economy grew faster than expected in the second quarter, but inflation pressures subsided, maintaining expectations of a September rate cut.

Also, it explained that the US GDP expanded by an annualized 2.8% in the second quarter, well above market expectations of 2% and accelerating from the 1.4% expansion in the previous period.

In SMC's view, markets are e fully pricing in a September rate cut by the US central bank, with two additional reductions anticipated before the end of the year. Increased physical demand from India, the world's second-largest gold consumer, is expected following the government's reduction of its gold import tax from 15% to 6%.

In Budget 2024, Sitharaman announced that BCD/AIDC on gold and silver bars is reduced to 5/1% from 10/5%. Hence, the total tax rate on gold (inc. 3% GST) will now be 9% vs. 18% earlier. Rate cuts came into effect immediately. Also, the holding period for the classification of gold (asset) held as either short-term or long-term has been reduced from 36 months to 24 months. Further, the finance minister announced a reduction in customs duty on gold and silver to 6% and platinum to 6.4%. As per HDFC Securities, this will give a boost to jewellery consumption.

Moreover, it added, conversely, top consumer China's net gold imports via Hong Kong slumped 18% in June from the previous month, as the recent surge in gold prices weighed on jewellery demand. On the geopolitical front, U.S. Vice President Kamala Harris pressured Israeli Prime Minister Benjamin Netanyahu to help reach a Gaza ceasefire deal, striking a tougher tone than President Joe Biden.

For the week, SMC expects Comex gold price to find support near $2,280 and face resistance near $2,410, with silver trading between $26.45 and $28.90. In India, this week, the brokerage said, gold prices on MCX may continue to trade lower, taking support near 66,500 and facing resistance near 68,900, while silver may trade between 78900 and 83,400 levels.