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The gold futures contract traded on the Multi Commodity Exchange has dropped about 3 per cent in the past week.
The contract has broken its important ₹28,000/10 gm support level and is trading below it. Strong rupee and a sharp fall in the global gold price triggered this price fall.
On the global front, the spot gold price has dropped below the psychological $1,300/ounce level. The outlook is bearish for the yellow metal to drop further to $1,250 in the coming days. This could keep the MCX-gold futures contract also under pressure.
For the MCX-gold, ₹28,000 will now be key support-turned-resistance level. Inability to breach this level will keep the contract pressured and can drag it lower to ₹27,400 in the coming week which is the next support level for the contract. A further break below ₹27,400 can take it to the next target of ₹27,000.
Short-term traders can wait for a bounce to go short at ₹28,000 with a stop-loss at ₹28,250 for the target of ₹27,500.
The contract will get some relief only if it breaches the ₹28,000 level decisively. It has to breach this level to ease the downside pressure.
Such a break can take the contract to ₹28,200 which is the 21-day moving average resistance level.
(Note: The recommendations are based on technical analysis. There is a risk of loss in trading.)
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