Gold may consolidate before heading north

 

Gold began last week on a weak note. The global spot gold prices fell, breaking below the key support level of $1,220 per ounce to a low of $1,212. However, the prices clawed back from the lows, recovering all the losses and closed the week on a flat note at $1,232 per ounce. A sharp fall in the US dollar index towards the end of the week helped gold to bounce back from the lows.

Similarly, silver reversed sharply higher from the lows of $14.23 per ounce and closed slightly higher for the week. The global spot silver prices were up marginally by 0.12 per cent and closed at $14.71 per ounce.

On the domestic front, the gold and silver futures contract on the Multi Commodity Exchange (MCX) remained subdued all through the week. The Indian rupee, making a strong recovery against the US dollar, capped the upside in gold prices in the domestic market. The MCX-Gold was down 0.6 per cent and closed at ₹31,750 per 10 gm. The MCX-Silver futures contract closed at ₹38,620 per kg and was down 0.24 per cent for the week.

Gold outlook

The broader view will continue to remain positive as long as the global spot gold ($1,232 per ounce) price trades above the $1,210-$1,200 support zone. However, a range-bound move between $1,200 and $1,240 is possible in the near term before gold eventually breaches the resistance level of $1,240. A strong break above $1,240 will see the yellow metal surge to $1,265 and $1,270 in the coming weeks.

On the domestic front, the MCX-Gold (₹31,750 per 10 gm) has a crucial support at ₹31,500. The contract will come under pressure if it declines below this support. In such a scenario, a fall to ₹31,300 or ₹31,000 is possible in the short term. On the other hand, if the contract manages to sustain above ₹31,500, an up-move to ₹32,000 and ₹32,300 is possible. A strong break above ₹32,300 will boost the momentum and trigger a fresh rally to ₹33,000 in the coming weeks.

Medium-term traders can hold the long positions taken at ₹31,846 and ₹31,600. Accumulate on dips at ₹31,400. Keep the stop-loss at ₹30,900 for the target of ₹33,000. Revise the stop-loss higher to ₹31,950 as soon as the contract moves up to ₹32,500.

Silver outlook

The global spot silver was volatile within the broad $14-$15 per ounce range. The outlook for silver continues to remain mixed. A breakout on either side of $14 or $15 will give a clear cue on the next move. A strong break above $15 will take the prices higher to $15.35 and $15.60. On the other hand, a break below $14 can drag silver lower to $13.65.

The MCX-Silver (₹38,620 per kg) has bounced from the key support level of $38,000. Immediate support is at ₹38,400 and resistance is at ₹39,000. A strong break above ₹39,000 will ease the downside pressure and take the contract higher to ₹39,400. A further break above ₹39,400 will then pave way for the next target of ₹40,000 or even ₹41,000 thereafter.

The outlook will turn negative if the contract declines below ₹38,000. Such a break can drag the contract lower to ₹37,500 and ₹37,000.

Medium-term traders can hold the long positions taken at ₹39,000 and ₹38,650. Retain the stop-loss at ₹37,850 for the target of ₹41,000. Revise the stop-loss higher to ₹39,300 as soon as the contract moves up to ₹39,700.

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