The gold futures contract traded on the Multi Commodity Exchange (MCX) has witnessed a sharp fall, last week. Contrary to our expectation of a rise to ₹28,000/10 gm levels, the contract dropped over 2 per cent after recording a high of ₹27,685 on May 18. It is currently trading near ₹27,100.

A sharp fall in the global spot gold ($1,204/ounce) prices dragged the domestic futures. The fall in the global price last week was triggered by the strong US housing starts numbers which helped the dollar to strengthen. Global prices are hovering above the psychological $1,200 levels. Resistance is at $1,215. As long as the yellow metal trades below this level, there is a strong likelihood for it to extend its fall to $1,190 and $1,180 in the coming week. The downside will be limited to $1,180, which is a strong short-term support level. The downside pressure will ease only if the spot price breaches the hurdle at $1,215. Such a break can take the price higher to $1,230 and $1,240.

On the domestic front, the contract has a key support at ₹26,800. Though this level can be tested in the coming days, an immediate breach is unlikely. A reversal from here can take the contract higher to ₹27,600 levels once again. Short-term traders can go long at current levels. Stop-loss can be kept at ₹26,500 for the target of ₹27,600. Intermediate dips to ₹26,800 can be used to accumulate long positions.

The outlook will turn negative only if the contract records a strong break below ₹26,800. The next targets will be ₹26,500 and ₹26,000.

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

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