Commodity Analysis

Gold to get boost from geo-political tensions

Gurumurthy K | Updated on April 15, 2018 Published on April 15, 2018

Gold prices surged in the past week as expected, but the rally was short-lived. The global spot gold prices rose to a high of $1,365 per ounce and came off sharply from there, giving back most of its gains made during the week.

The release of the US Federal Reserve’s minutes of its March meeting triggered the sudden reversal in gold. The minutes acknowledged the further strengthening of the US economy and the rise in inflation. This triggered a sharp pull-back in gold prices on the back of profit booking.

Gold tumbled to a low of $1,333 on Thursday, but managed to bounce back from there to close at $1,334 per ounce, up 1 per cent for the week.

Silver outperformed gold last week by surging 1.7 per cent. The global spot silver prices closed at $16.55 per ounce last week.

The intensification of geo-political tensions, after Friday’s missile attack on Syria, is likely to nudge gold prices to move higher.

On the domestic front, weak rupee limited the loss in the gold and silver futures contract traded on the Multi Commodity Exchange (MCX).

The MCX-Gold futures contract made an intra-week high of ₹31,562 per 10 g and has come off from there to close at ₹31,118 per 10 g, up 1.38 per cent for the week.

The MCX-Silver futures contract, on the other hand, was up 1.8 per cent last week. It has closed at ₹38,927.

Gold outlook

The global spot gold ($1,333 per ounce) has immediate support in the $1,330-$1,325 region. Trading above this support zone, a rally to the $1,360-$1,370 resistance zone is possible this week.

Inability to breach $1,370 can drag the prices lower to $1,330 or $1,325 again. A break below $1,325 will increase the likelihood of the fall extending to $1,310.

But if gold breaches $1,370 on the back of the ongoing geo-political tensions, it can gain fresh momentum. Such a break will pave way for the next target of $1,405.

The MCX-Gold (₹31,118 per 10 gm) futures contract has immediate support at ₹31,000 and resistance at ₹31,330. The bias remains bullish for the contract to sustain above ₹31,000 and break above ₹31,330 in the coming days. The next target is ₹32,000.

The outlook will turn negative only if the contract breaks below the support at ₹30,850. Such a break, though less likely, can take the contract lower to ₹30,500.

Silver outlook

The global spot silver ($16.65 per ounce) retains its $16.1-$17 sideways range. A breakout on either side of $16.1 or $17 will decide the next move. A strong break above $17 can take it to $17.5. On the other hand, a break below $16.1 can drag silver to $15.5.

The MCX-Silver (₹38,927 per kg) has a key support at ₹38,500. As long as it remains above this support, the outlook is bullish for it to target ₹40,000 and ₹40,200 in the coming days.

The near-term view will turn negative for a fall to ₹38,000 and ₹37,850 if the contract breaks below ₹38,500.

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