Gold makes a comeback

Spot gold prices crossed the psychological mark of $1,300 and closed at $1,309.6/ounce last week, up 1.2 per cent. An increase in geopolitical tensions towards the weekend after the US authorised air strikes on Iraq, helped the yellow metal crawl higher.

In the initial part of the week, the metal was moving south as data showed that the number of US citizens filing for unemployment benefits dropped.

Claims dropped by 14,000 to 289,000, a decrease of 4,000 from the previous week’s total of 297,500.

Safe haven bets buttressed the US dollar too. The US dollar index rose to a high of 81.72 and closed at 81.39, stealing the thunder from gold.

However, assets of the SDR Gold Trust — the largest gold-backed exchange traded fund in the world — dropped by 0.7 per cent (or 5.98 tonnes) to 795.86 tonnes.

Silver was not able to recoup the losses made in the initial part of the week. The white metal saw the price end at $19.9/ounce, down almost 2 per cent. Since silver does not have the hallowed safe-haven status, it appears to have lost out last week. Platinum prices ended at $1,475.4/ounce, up 0.8 per cent.

In the domestic market, the weak rupee helped investors make money on bullish bets on gold. Spot gold prices ended 2.5 per cent higher at ₹2,858/gram (24 karat).

Global cues

If tensions in Ukraine, Iraq and Gaza escalate further this week, gold prices may move higher. Technically, the charts also support this.

With the ongoing political tensions, it is likely that the sentiment in the stock markets will continue to be negative for some more time. This is positive for gold investors. So, long positions will be safer than shorts this week.

There are key data releases due this week in the US. The retail sales data is on Wednesday, followed by the jobless claims data the next day.

Industrial production data will be released on August 15. Keep an eye on the dollar too. It weakened against most currencies after the US’ air strikes in Iraq.

Domestic market

In the domestic market, gold prices recorded a sharp increase, thanks to the weak rupee. The rupee moved to a low of 61.74 against the dollar and settled at 61.15 on Friday.

The rise in crude oil prices in the international market and the tanking of domestic equity markets weighed on the currency. Gold futures on MCX gained 2 per cent and closed at ₹28,604 (per 10 gm).

However, silver futures closed in the red, tracking the downtrend in silver prices globally. MCX Silver futures dropped to ₹43,580 (per kg), down 2 per cent.

As discussed last week, domestic market prices of gold will continue to be dictated by the rupee’s movement for some more time.

The increasing geopolitical tensions across the globe are likely to keep oil prices up in the short term, keeping emerging market currencies under pressure.

Chart levels

The comeback from the lows of the previous week to cut the $1,300 mark shows that there is more steam left in gold prices.

This week, it may target $1,340 levels. However, the neutral candle on Friday suggests that the market is uncertain about prospects for the metal in the short term and may try to go sideways for one-two sessions.

MCX Gold prices moved up very sharply last week, rising above both the first and second target. This week there is a possibility of the metal moving past ₹29,000 and testing ₹29,500 levels. On the downside, the levels are ₹28,000 and ₹27,800.

MCX Silver stopped at its resistance and slipped to cut its support at ₹43,500 last week.

Unless the rupee depreciates sharply, this contract may find it tough to break the bearish trend.

Downside targets for the contract are ₹43,000 and ₹42,700. On the upside, levels are ₹44,000 and ₹44,600.

After this, the next target will be ₹45,000.

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