Commodity Analysis

Short-term outlook is positive for gold

Gurumurthy K | Updated on March 24, 2019 Published on March 24, 2019

Gold seems to be slowly gaining strength. The global spot gold prices surged over a per cent intra-week to make a high of $1,320 per ounce. Prices then came off slightly from the high and closed at $1,313.6 per ounce, up 0.87 per cent for the week.

Silver surged to test its resistance at $15.60 last week, but failed to sustain higher. The global spot silver prices surged over 2 per cent intra-week and made a high of $15.64 per ounce before closing the week at $15.42 per ounce.

Fed supports

Gold gained sheen after the US Federal Reserve kept the rates unchanged and forecast no rate hikes this year. Earlier, in December last year, the Fed had predicted for two rate hikes in 2019. This dragged the dollar index sharply lower to 95.74 and, in turn, pushed gold prices higher. Though the dollar index recovered from the lows to close the week at 96.65, gold managed to sustain higher.

The Fed’s decision last week can support gold to sustain higher and move further up in the short term. The US economic data releases in the coming months should be strong in order to change the Fed’s stance on the pace of the future rate hikes.

Gold outlook

The short-term outlook for the global spot gold ($1,213.6 per ounce) is positive. Th immediate support is at $1,310. The next significant supports are at $1,300 and $1,295. As long as gold trades above $1,300, there is a strong likelihood of it breaching $1,320 and rallying to $1,330 in the near term. A further break above $1,330 will then pave the way for a further rally to $1,350 over the short term.

A cluster of supports are poised in the broad $1,300-1,290 region which can restrict the pace of the fall if gold declines below $1,300. The outlook will turn negative only if gold declines decisively below $1,290, which looks less probable. The target below $1,290 is $1,275.

On the domestic front, the support around ₹31,750 seems to have held well for the gold (₹32,140 per 10 gm) futures contract on the Multi Commodity Exchange (MCX). The immediate support is in the ₹32,000-31,950 region. As long as the contract sustains above ₹31,950, a corrective rally to ₹32,500 and ₹32,550 is possible in the coming days. A further break above ₹32,550 will increase the likelihood of the rally extending to ₹32,850 and ₹33,000 thereafter.

The contract will come under pressure only if it makes a decisive close below ₹31,750. In such a scenario, MCX-Gold can fall to ₹31,250.

Silver outlook

The short-term outlook for silver is mixed. The global spot silver ($15.42 per ounce) can broadly remain range-bound between $15 and $15.65 in the short term. A breakout on either side of $15 or $15.65 will then decide the direction of the next move. A fall below $15 can drag silver to $14.85. On the other hand, a strong break above $15.65 can take silver higher to $16.1 and $16.25.

The MCX-Silver (₹38,362 per kg) futures contract has been stuck in between ₹37,700 and ₹39,000 over the three weeks. If the contract declines below ₹37,700, a fall to ₹37,000 is possible. On the other hand, if MCX-Silver manages to rise past ₹39,000, a fresh rally to ₹39,500 and ₹40,000 can be seen.

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