Bullion Cues: Will Gold Stay Flat?

Gold posted a marginal gain last week as the dollar retreated from its high. However, silver continues to struggle and has posted a slight decline. In the international spot market, gold was up 1.2 percent last week, closing at $1,727.6 an ounce on Friday. Silver, on the other hand, was down 0.5 percent to end the week at $18.59 an ounce.

Similarly, gold futures in the domestic market – on the Multi Commodity Exchange (MCX) – were up 1.1 percent to end the week at £50,644 (per 10 grams). But silver futures were down 0.8 percent to end the week at £55,131 (per kg).

Basically, there seems to be no boost for the bullion. Looking at the latest data from the World Gold Council (WGC), demand from India, one of the yellow metal’s largest consumers, saw subdued retail demand in June as the wedding season drew to a close. At around 44 tons, imports in June were 55 percent lower than in the previous month. According to the WGC, July demand has remained subdued so far due to weak rural demand, and gold exchange-traded funds (ETFs) in India recorded a net outflow of 0.6 tons in the first two weeks of July.

Also technically, the charts don’t seem promising as there are no signs of a bullish reversal.

MCX Gold (₹50,644)

Since the beginning of May, the gold future on the MCX (due in August) has been moving sideways – it fluctuates between ₹50,000 and ₹52,000. Until one of these levels is broken, the next phase of the trend remains uncertain.

Note, however, that the contract rebounded from £50,000 last week, where the 200-day moving average collapses. Also, there is a rising trendline that could provide support around ₹49,500, making the ₹49,500-50,000 price area a good support band.

Therefore, we can expect gold futures to rally in the coming week. If it gathers enough momentum to break the ₹52,000 hurdle, we can expect a rally to ₹54,000 within a few weeks. On the other hand, if it drops below £49,500 it can drop to £47,700, the next support.

MCX Silver (₹55,131)

Silver futures (expiry date September), which has been in a downtrend for the past three months, is currently testing support at ₹55,000. If the contract bounces off this support and recovers, it may face resistance at ₹58,500 and ₹60,000. Essentially, the £58,500 – £60,000 price area is a sizeable resistance band and a rally above these levels is less likely. Resistance above ₹60,000 can be spotted at ₹63,000.

But if the contract falls below ₹55,000, it can quickly drop towards the support at ₹52,000. A dip below that can pull the contract up to £50,000. This is a critical support from which the contract will most likely bounce.

Published on

July 23, 2022

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