Gold gets a breather from US Fed’s decision

Gold prices have recovered sharply in the past week, thanks to the US Federal Reserve for not giving any new surprises to the market in its meeting. The US Federal Reserve as expected increased the interest rate by 25 basis points. It also left the future rate hike path unchanged which triggered a sell-off in the dollar. This helped gold to recover sharply from its low of $1,236 per ounce last week. The yellow metal has surged over 2 per cent from this low and is currently trading at $1,262.

Silver has surged over 3 per cent from its low of $15.6 per ounce to the current levels of $16.1.

On the domestic front, the gold and silver futures contract on the Multi Commodity Exchange (MCX) have reversed higher in tandem with the global prices. The MCX Gold futures contract made a low of ₹28,055 per 10 gm and has bounced to ₹28,435. The MCX Silver contract has reversed higher after making a low of ₹36,672/kg and is currently trading at ₹37,484.



Gold outlook



The global spot gold ($1,262/oz) has an immediate resistances at $1,268 and $1,270 which are likely to be tested in the near-term. A break above $1,270 can take the prices higher to $1,275 — the next crucial resistance level. A strong break and a decisive weekly close above $1,275 will ease the downside pressure. Such a break will increase the likelihood of gold revisiting $1,300 levels in the coming weeks. But if gold reverses lower either from $1,270 or $1,275, a pull-back move to $1,265 or $1,260 is possible initially. The contract (₹28,435/10 gm) has reversed higher from a key ₹28,200-28,000 support zone. This signals the beginning of a fresh leg of upmove. A rally to ₹28,750 is likely in the coming days. Whether the contract breaks above ₹28,750 or not will decide the next move. A break above ₹28,750 can take the contract higher to ₹28,900 initially. Further break above ₹28,900 will pave way for the next target of ₹29,300. But inability to break above ₹28,750 can trigger a pull-back move to ₹28,400 or even lower.



Silver outlook



The near-term outlook is positive for silver. The global spot silver is at $16.1 per ounce. An upmove to $16.6 is likely in the near-term. Inability to break above $16.6 can pull the prices lower to $16.25 or $16.1. But a strong break above $16.6 will increase the likelihood of the upmove extending to $16.75 or even to $17.

The contract (₹37,484/kg) can rise to ₹38,200 or even to ₹38,500 in the short-term. The region around ₹38,500 is a crucial resistance for the contract. A strong downward reversal from there will be a threat to the contract and a fall to ₹35,500 over the medium term is possible. But a strong break and a decisive weekly close above ₹38,500 will ease the downside pressure. Such a break will then increase the possibility of the contract extending its rally to ₹39,500.

Note: The recommendations are based on technical analysis and there is a risk of loss in trading.

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