Bullion Cues. Gold tussles with dollar

Gold struggled to gain traction, as a stronger dollar curbed demand for the yellow metal. Global spot gold prices tumbled from a high of $1,224 per ounce on Monday and remained below the psychological $1,200 mark for most part of the week. They fell to a low of $1,184 on Wednesday before closing at $1,196 on Friday, down 2.2 per cent for the week.

Among the other precious metals, Silver tumbled 5.6 per cent last week and closed at $16.08 per ounce. Platinum fell 2.5 per cent to close at $1,198.88 per ounce on Friday.

The week began with strong industrial production data from the US on Monday. Manufacturing output rose 1.1 per cent in November from a revised 0.4 per cent in October. Gold prices plummeted below $1,200 from their high of $1,224, after the upbeat US data on Monday.

However, the surprise 650 basis point rate hike from Russia on Tuesday helped gold gain ground and rise to $1,220 levels. But the party was short-lived as the dollar strength dragged gold prices below $1,200 once again.

The weekly jobless claims in the US fell by 6,000 to 2,89,000 signalling strength in the US labour market.

Gold seems to be struggling to regain its safe haven status, despite the ongoing currency crisis in Russia. Instead, dollar continues to rally as it did at the time of the US air strikes on Syria in late September and the Russia-Ukraine crisis earlier this year.

The dollar index witnessed a strong rally last week and closed at 89.6 on Friday, up 1.4 per cent for the week. It can rise further to test 90 in the coming week.

Any positive economic data release from the US in the coming week can push the dollar up, which will be negative for gold.

The key data release to watch for this week will be the existing home sales on Monday. It will be followed by the personal income, durable goods order, new home sales and the GDP data release on Tuesday. The weekly unemployment claims will be released a day in advance this week on Wednesday as the US markets are closed for Christmas on Thursday.

On the domestic front, the gold futures contract traded on the Multi Commodity Exchange (MCX) closed at ₹26,998 per 10 gm, marginally down by 0.8 per cent for the week. The weakness in the Indian rupee limited the fall in MCX-gold futures. Rupee tumbled below 63 to a 13-month low of 63.88, last week. This took the MCX-gold futures contract to a high of ₹27,796. However, the price fell by 2.9 per cent as the rupee recovered towards the end of the week.

MCX-Silver, on the other hand, tumbled 4.6 per cent last week to close at ₹36,940 per kg. The price fell from an intra-week high of ₹38,889 and remained below the crucial ₹37,000 level all through the second half of the week.

The global spot gold prices are struggling to find buyers above the psychological $1,200 mark. Key resistance is at $1,210. A strong breach and a close above this level is required, to build a positive momentum. Such a break will pave the way for a rally to $1,220 and $1,240.

On the other hand, inability to surpass the resistance at $1,210 will keep the prices under pressure. Support is at $1,190. Declines below this level can drag gold prices lower to $1,180 and $1,160 in the coming week.

On the domestic front, the reversal from the high of ₹27,796 is technically important, as it has happened at a key trend line as well as the 200-day moving average poised at ₹27,600. Failure to move past ₹27,000 can keep the contract under pressure and drag it down to ₹26,650, this week. A further fall below this level can target ₹26,500 and ₹26,300.

However, the downside could be limited unless there is a sharp fall in the global prices as the rupee is expected to remain weak. On the other hand, a strong bounce above ₹27,000 can bring fresh buyers into the market and take the contract higher to ₹27,300 and ₹27,600 this week. A strong break above ₹27,600 can see the rally extend towards ₹28,000 this week.

The MCX-Silver futures contract, on the other hand, has been range-bound between ₹36,000 and ₹39,000 over the last two weeks. A breakout on either side of this range will decide the direction of the next trend. If the contract manages to move past ₹37,000, a rally to ₹37,500 and ₹38,500 is possible, this week. But if the contract sustains below ₹37,000, a dip to ₹36,000 — the lower end of the range — looks more likely.

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