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Last week, the gold futures contract traded on the Multi Commodity Exchange (MCX) marginally advanced by 0.6 per cent to close at ₹31,404 per 10 gm. In early July, the contract encountered a key resistance at ₹32,000 and then started to consolidate sideways in the broad range between ₹31,000 and ₹32,000.
Within this range, the contract has been trading in narrow band between ₹31,000 and ₹31,500 over the past ten trading sessions. On Tuesday, the contract dropped by ₹44 or 0.14 per cent to trade at ₹31,335 and is currently testing its 21-day moving average.
The daily relative strength index is featuring in the neutral region. Other indicators such as the price rate of change and moving average convergence divergence are giving out mixed signals. Traders with a short-term perspective should desist from trading in the contract as long as it moves in a narrow range between ₹31,000 and ₹31,500.
A decisive downward breakthrough of ₹31,000 will strengthen the bearish momentum and pull the contract down to ₹30,500 and then to ₹30,000. But, to alter the short-term uptrend, the contract needs to conclusively break the key trend-deciding level at ₹30,000. Such a break can drag the contract down to ₹29,500 or even ₹29,000 in the short to medium term.
On the other hand, a strong rally above ₹31,500 can take the contract higher to ₹32,000. To reinforce the bullish momentum, the contract has to conclusively breach the ₹32,000 hurdle . Subsequent resistances are at ₹32,500 and ₹33,000.
On the global front, the spot gold price has been on a sideways movement in the band between $1,320 and $1,360 per ounce since early July. A strong downward breakthrough of $1,320 can pull it down to $1,300 and then to $1,280. Significant resistances beyond $1,360 are at $1,380 and $1,400.
MCX-Silver: The MCX silver contract was in a sideways movement in the range between ₹46,000 and ₹49,000 from early July. The contract had decisively breached the lower boundary of this range by declining 1.4 per cent to close at ₹45,444 on Friday.
This selling pressure continued and the contract breached its 50-day moving average as it fell another 2 per cent on Monday. With a small gain of 0.4 per cent the contract currently trades at ₹44,697 per kg.
The near-term outlook is bearish for the contract. The daily relative strength index is featuring in the bearish zone. Traders with a short-term perspective can make use of the corrective rallies to initiate fresh short positions while maintaining a stop-loss at ₹45,900.
The contract can extend its downward move and test the support at ₹43,500 and then at ₹42,000 in the short term.
On the other hand, key resistances are placed at ₹46,000 and ₹47,000. A strong rally beyond ₹47,000 is needed to alter the bearish outlook and take the contract northwards to ₹48,000 and ₹49,000 in the medium term.
On the global front, the spot silver price tumbled 2 per cent, breaking a key support at $19.4 decisively on Monday.
It currently trades at $18.9 per ounce. The short-term outlook is bearish. It can continue to fall and test supports at $18.4 and $18 in the short term.
Key resistances are at $19.4, $19.8 and $20.
Note: The recommendations are based on technical analysis. There is a risk of loss in trading.
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