Domestic gold market sparkles on festival demand

The demand for gold is once again sparkling this Diwali. According to the All India Gems and Jewellery Trade Federation, gold sales this Diwali were 20 per cent higher than the previous year.

Since the Indian rupee is range-bound between 61 and 62 over the last few weeks, the domestic gold price is now largely influenced and moves more in tandem with the global price. The probability is high for the market to remain stable at least until the US Federal Reserve meeting on Wednesday. The outcome of this meeting is expected to increase the volatility in the market. Also, it could set the short-term trend for the gold price.

MCX-gold/silver futures

The MCX-gold futures contract is facing resistance at ₹27,600 per 10 gm over the last couple of weeks. The contract has come off from Tuesday’s high of ₹27,640. However, with key support at ₹27,000 (21-day moving average), there is no danger for the short-term uptrend. A reversal from here can take the contract higher to ₹27,600 once again. A strong close above ₹27,600 will add momentum to the rally and take the contract higher to ₹27,850 and ₹28,000 thereafter.

The outlook will turn bearish if the MCX-gold declines below ₹27,000. Next targets will be ₹26,750 and ₹26,500.

The MCX-silver futures contract is looking much weaker than gold. The 21-day moving average, currently at ₹38,590 per kg has strongly resisted a rally all through this month. A strong close below ₹38,000 could increase the downside pressure and drag the contract to ₹37,200 and ₹36,950 in the short term.

The contract would get some relief only on a strong close above the 21-day moving average. It can then rise to ₹39,200 and ₹39,900.

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