As expected the gold futures contract traded on the Multi Commodity Exchange witnessed a sharp rise breaking the psychological ₹28,000/10 gm in the last week. The bullish outlook remains intact. However, the contract has reversed slightly lower after recording a high of ₹29,085 on Friday. The 200-day moving average at ₹28,870 is providing a resistance. The reversal on Friday suggests that an intermediate pull back is possible in the coming days before the rally extends further.

Having said this, while the contract remains below ₹29,000, a pull back to ₹28,300 and even ₹28,000 looks likely. Such declines will be a good opportunity for traders to initiate fresh long position in the contract. MCX-gold can be bought on dips at ₹28,400. If the decline extends further, accumulate more long positions near ₹28,000. Stop-loss can be kept at ₹27,800 for the target of ₹29,300.

With an inverted head and shoulder pattern on the daily chart, the overall outlook remains bullish. The neck-line support is at ₹28,300 and then strong psychological support is at ₹28,000. Chances of a break below this level are lowDeclines to these levels can attract fresh buying interest in the market. A reversal from either ₹28,300 or ₹28,000 can take the contract higher to ₹29,315 which is the 38.2 per cent Fibonacci retracement resistance level.

The outlook for MCX-gold will turn bearish only on a strong break below ₹28,000. The ensuing targets on such a break will be ₹27,800 and ₹27,600.

(Note: The recommendations are based on technical analysis. There is a risk of loss in trading.)

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