Gold and silver futures declined by over 3 per cent each on profit-taking, with crude oil falling by over 7 per cent on the Multi Commodity Exchange of India (MCX) on Friday.
The decline in crude oil was sharper because the MCX crude contract is based on West Texas Intermediate (WTI) prices, which fell sharply compared to the Brent. While WTI is the benchmark for the US, Brent Crude is the Opec members’ domain.
WTI oil was quoting at a 21-year low, at around $18 per barrel. Brent is still at $28, but the decline was sharper.
Gold futures for delivery in June declined by 3.09 per cent to Rs 45,796/10g on the MCX. Following suit, silver futures for delivery in May plunged by 3.3 per cent to Rs 42,794/kg. The worst loser on MCX was crude oil, which reported a sharp decline of 9.2 per cent for April delivery, to trade at Rs 1,417 a barrel. Gold prices have gained around 20 per cent in rupee terms, and 13 per cent in dollar terms, since the pandemic came into light in November. Investors have found a safe haven appeal in the yellow metal, as the entire world explores solutions to curb the pandemic that has infected millions.
“Gold is overbought, and hence today’s decline is a consequence of profit-booking. Silver followed gold in price decline. Crude oil declined due to uncertainty over the output cut negotiated between the Organisation for Petroleum Exporting Countries (Opec) and Russia,” said Gnanasekar Thiagarajan, director of Commtrendz.
Both gold and silver prices in Mumbai’s Zaveri Bazaar declined by 2.5 per cent each to close at Rs 45,530 per 10g and Rs 42,270 a kg on Friday, compared to Rs 46,740 per 10g and Rs 43,550 a kg on Thursday, respectively.
In international markets, gold and silver prices weakened on a sharp pick-up in equity markets, after US president Donald Trump proposed guidelines under which state governors could act to revive the US economy from the lockdown, in a staggered three-stage process. Meanwhile, China reported better-than-expected economic data for the January-March quarter. China reported contraction of 6.8 per cent in its economy between January and March, against analysts’ expectation of a double-digit decline.
“US president Donald Trump’s direction to the state governors has sent a positive signal to equity markets, resulting in a decline in gold and silver prices. However, the outlook for gold is still in favour of a price rise on global stimulus, which is set to weaken the dollar and strengthen gold,” said Kishore Narne, associate director at Motilal Oswal Financial Services.
The lockdown, however, continues to pile the pressure on demand of crude oil. Prices of base metals like copper, lead, zinc, and nickel rose amid expectations of recovery in demand, given that markets have started discounting the Covid-19 impact. Meanwhile, major global economies have started pumping fresh money into the system, to overcome financial stress that emerged after the lockdown.