Gold falls as dollar reverses higher

After hovering at $1,270 per ounce all through the week, gold prices fell sharply over one per cent on Friday after the US jobs data. The prices fell over one per cent to a low of $1,254 and recovered from there to close the week at $1,259 per ounce, down 0.8 per cent. The US Non-Farm Payrolls increased by 209,000 in July as against the market expectation for an increase of 183,000. The unemployment rate fell to 4.3 per cent in July from 4.4 per cent a month earlier. The US job numbers beating the market expectation took the sheen off from gold, as the US dollar reversed sharply higher after the data release.

Silver, on the other hand, was beaten down much harder than gold last week. Silver prices tumbled 3 per cent last week and closed at $16.27 per ounce.

On the domestic front, the gold futures contract on the Multi Commodity Exchange (MCX) was broadly range-bound. The contract has closed at ₹28,465 per 10 gm, down 0.4 per cent for the week. The MCX-Silver futures contract moved in tandem with the global prices and fell sharply by 3.1 per cent to close at ₹37,262 per kg.

The dollar index (93.54) which had fallen sharply over the last three weeks, got a breather on Friday after the positive US job numbers. The index reversed higher over one per cent from the low at around 92.5 and has closed at 93.54. This rally was also on the back of short-covering. As long as the index trades above the imediate support level at 93, a rise to 94 looks likely. Further break above 94 can take the index higher to 94.50. The region around 94.5 is a key hurdle for the dollar index. Inability to break above this level can pull the index down again to93.5 and 93in the near term. The 200-week moving average at 93.30 is a crucial support. A strong break below this support is needed for the index to come under pressure again and resume its downtrend.

The global gold ($1,259 per ounce) has key supports at $1,250 and $1,247. A test of these supports is possible in the initial part of the week. If gold manages to reverse higher from $1,250 or $1,247, the downside pressure may ease. Such a reversal will increase the possibility of the prices moving up to $1,270 and $1,275 levels once again. But gold will come under fresh selling pressure if it breaks below $1,247 and can fall to $1,244 initially. Further break below $1,244 will increase the likelihood of the fall extending to $1,240 or even lower thereafter.

MCX-Gold (₹28,465 per 10 gm) can remain range-bound between the support at ₹28,250 and resistance at ₹28,650. A breakout on either side of this range will decide the next move. A break below ₹28,250 can take the contract lower to ₹27,950 initially. Further break below ₹27,950 can drag it to ₹27,700 or even ₹27,500. On the other hand, if the contract manages to break the range above ₹28,650 it can rise to ₹29,000.

The global spot silver ($16.27 per ounce) has a support at $16.20. A break below it can take the prices lower to $16 or even $15.70.

But if it manages to sustain above $16.20, a bounce to $16.50 is possible. Further break above $16.50 can take the prices higher to $16.75 thereafter.

MCX-Silver (₹37,262 per kg) has support at ₹36,850, which can be tested in the initial days. If the contract manages to reverse higher from there, a relief rally to ₹37,650 is possible.

Further break above ₹37, 650 will increase the likelihood of the contract extending its rally to ₹38,150. On the other hand, if the MCX-Silver breaks below ₹36,850, it can fall to ₹36,250 thereafter.

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