Gold surges on safe haven demand

Geopolitical tensions and hopes of fewer rate hikes by the Fed are stoking prices

The support at $1,250 per ounce had limited the downside in gold last week. The global spot prices reversed sharply higher from the low of $1,251.6 per ounce to close the week at $1,289.30 per ounce, up 2.4 per cent for the week. The global spot silver prices surged 5.2 per cent and closed at $17.11 per ounce.

This is thanks to the increasing geopolitical tensions between the US and North Korea. The US Consumer Price Index inflation missing the market expectation also aided gold prices. The US CPI rose 0.1 per cent in July, lesser than the market expectation for a rise of 0.2 per cent. A slow-down in the inflation increases hopes in the market that the US Federal Reserve might slow down its pace of raising the interest rates, going forward.

On the domestic front, the MCX-Gold futures contract rose 2.2 per cent last week and closed at ₹29,203 per 10 gm. The MCX-Silver futures contract, on the other hand, surged 5.2 per cent last week and closed at ₹39,194 per kg.

Weak dollar to help

The US dollar index (93.07) failed to sustain higher in the past week and reversed lower from around 93.90. A revisit of the crucial 93.30-93.25 support zone is likely in the coming days. The pull-back move last week increases the possibility of the index breaking below this crucial support zone this time. A strong break below 93.25 can bring selling pressure on the index and knock it down to 91 or even 90.3. Such a fall in the dollar index can boost the gold prices further and take it above $1,300.

Gold outlook

The global spot gold ($1,289 per ounce) has an immediate support at $1,284 level.

As long as it trades above this support, a rise to $1,295 or $1,298 is possible. Key resistance is poised in the $1,296-$1,298 zone. Inability to breach this hurdle can drag the prices lower to $1,280 and $1,275 once again.

But if gold manages to surpass the resistance at $1,298 decisively, a fresh rally to $1,325 can be seen. A further break above $1,325 will increase the likelihood of the prices hitting $1,350. The yellow metal will come under pressure only if it declines below $1,275. Such a fall can drag the prices lower to $1,250 levels once again.

MCX gold (₹29, 203 per 10 gm) has risen sharply in the past week, breaking above the key resistance around ₹28,650. Immediate support is at ₹29,000 and the next key support is at ₹28,800. Dips to these supports will find fresh buying interest. A rise to ₹29,450 or ₹29,650 is likely in the near term. Inability to break above ₹29,650 can drag the contract lower to ₹29,000 or ₹28,800. But a strong break above ₹29,650 will pave way for the next target of ₹29,900.

Silver outlook

The global spot silver ($17.11 per ounce) has support at $16.85. A rise to test the key resistance at $17.5 is likely in the coming days. A strong break above this resistance can take silver to $18 or even higher. But a pull-back from $17.5 can drag the prices lower to $17 or $16.85 thereafter.

On the domestic front, the MCX-Silver futures (₹39,194 per kg) contract has risen breaking above the key resistance level of ₹38,750. An inverted head and shoulders bullish reversal pattern has been formed on the daily chart. The neck line support of this pattern is at ₹38,750.

As long as the contract stays above this support, a rise to ₹40,000 or ₹40,250 is likely. However, if it declines below ₹38,750, it can drop further to the level of ₹38,000 or 37,850.

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