Gold futures traded on the Multi Commodity Exchange (MCX) witnessed a strong rally over the past week. The contract has increased 3 per cent and is currently trading near ₹27,700 per 10gm. A sharp rise in the global price has offset the impact of a strong rupee.

The Swiss National Bank’s surprise move to abandon its cap on the franc, triggered a sharp sell-off in risky assets and helped the yellow metal regain its haven status. Following this, the global spot gold price ($1,275/ounce) surged and breached its key 200-day moving average resistance at $1,253. This is likely to act as a good support level for gold. It also has other supports at $1,270 and $1,266. With these supports in place, gold can extend its rally towards $1,310 and $1,315 in the short-term.

On the domestic front, the MCX gold futures have also breached their 200-day moving average resistance at ₹27,370. Immediate support is at ₹27,580. Although there is some resistance near ₹27,900 and ₹28,100 levels, the outlook for the contract remains bullish as long as it trades above ₹27,370. A break above ₹27,900 and ₹28,100 looks likely in the coming days. Such a break can take the contract higher to ₹28,500 and even to ₹29,000 in the coming days.

Traders with a short-term perspective can go long at current levels. Stop-loss can be placed at ₹27,300 for the target of ₹28,500.

The outlook will turn negative only if the contract declines below the 200-day moving average level of ₹27,370. Such a fall can drag the contract lower to ₹27,000 and ₹26,800 subsequently.

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

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