Gold and silver prices declined on February 17, pressured by thin trading volumes and a stronger US dollar, which weighed on the investor sentiment in the bullion market.
In the domestic physical market, 24-carat gold fell 1.88 per cent from the previous close to Rs 1,52,200 per 10 grams, according to data from the India Bullion and Jewellers Association (IBJA). Fine silver prices tumbled 2.73 per cent to Rs 2,34,380 per kilogram as against its previous close.
In the domestic derivatives market, the April gold futures contract on the Multi Commodity Exchange (MCX) fell up to 2.27 per cent to an intraday low of Rs 1,51,244 per 10 grams. The March silver futures slipped as much as 4.40 per cent to the day’s low at Rs 2,29,352 per kilogram.
However, as of the latest trade gold and silver prices recovered some lost ground. MCX gold futures contract was at Rs 1,52,950 per 10 grams, down 1.17 per cent, while MCX silver futures was down by 3.29 per cent to Rs 2,32,002 per kilogram.
Around the same time, COMEX gold futures traded at $4,944.6 per ounce, down 2.10 per cent, and COMEX silver futures quoted at $74.39 per ounce, down 4.83 per cent.
The gold-silver ratio, a key measure of relative value between the two metals, currently stands at 66.47. The ratio indicates the number of ounces of silver required to buy one ounce of gold.
Stronger US Dollar Weighs On Sentiment
A stronger US dollar weighed on precious metal sentiment in trade today. The US Dollar Index, which tracks the greenback’s strength against six major global currencies, rose 0.21 per cent to 97.02, as of the time pof writing.
A firm dollar typically puts pressure on gold prices, as it makes the metal more expensive for buyers holding other currencies. When the greenback strengthens, overseas demand for gold often slows, adding downward pressure on domestic prices.
Thin Trading Activity Due To Holiday
Trading activity remained thin as several key markets were on holiday. Mainland China and Hong Kong were closed for Lunar New Year celebrations, which limited regional buying and selling of precious metals. Mainland Chinese exchanges will remain shut for the entire week.
In addition, US markets were shut on February 16 for Presidents’ Day, adding to the global liquidity squeeze.
Gold, Silver ETFs Fall
Gold exchange-traded funds (ETFs) also fell in the range 1-2 per cent by the close of the trading. ICICI Pru Gold ETF, SBI Gold ETF, and DSP Gold ETF fell the most, declining slightly over 2 per cent each.
Similarly, Edelweiss Silver ETF plunged 3.94 per cent, emerging as the top loser in the category. Following it, ICICI Pru Silver ETF, and 360 ONE Silver ETF fell nearly 3 per cent each. All other silver ETFs fell in the range 2-3 per cent.
What Should Investors Do
Gold and silver prices have corrected considerably from their record highs touched last month. MCX gold is trading nearly 21 per cent lower from its record high level of Rs 1,93,096 per 10 grams. Similarly, MCX silver is available at nearly 45 per cent discount to its lifetime high of Rs 4,20,048 per kilogram.
Amid the price correction, investors are keen to know whether the current levels offer a good buying level or not.
"The absence of major US or China data this week may keep gold in a range-to-weak bias," said Jateen Trivedi, vice president, research analyst - commodity and currency at LKP Securities.
Aksha Kamboj, vice president of the IBJA, said, "Gold is easing slightly in the current market but is still higher than last week’s levels. The overall trend is still supportive, showing continuous safe-haven demand despite the temporary profit-booking. The current easing seems to be a part of the consolidation process rather than a reversal." She added that "gold may continue to remain strong above key levels if global uncertainties continue."
On silver, Kamboj noted, "Silver is continuing its correction trend in the current market after a strong rally in the previous weeks. The sharp correction is due to the higher volatility of silver prices and their sensitivity to changes in industrial sentiments." She added that prices remain elevated compared to last week, indicating that "the overall trend is still intact."
