The gold futures contract traded on the Multi Commodity Exchange (MCX) witnessed a sharp rally of over 3 per cent in the past week. A strong surge in the global spot gold price and a weak rupee helped in pushing the MCX-gold futures contract above the psychological ₹27,000 per 10 gm barrier. However, the contract has taken a pause and is consolidating in a narrow range between ₹27,000 and ₹27,350 since Wednesday. It is currently hovering near ₹27,150. Although the global spot gold ($1,212/ounce) has retreated significantly from its high of $1,238, the domestic futures contract is managing to sustain above ₹27,000 mark. Thanks to the weak rupee.

The outlook is positive for the MCX-gold futures contract. As long as it trades above ₹27,000, a further rally to ₹27,600 and ₹27,750 looks likely in the coming week. Short-term traders can go long with a stop-loss at ₹26,850 for the target of ₹27,500.

The outlook will turn negative if the contract records a strong break below ₹27,000. In such a scenario, it can fall to ₹26,700 and ₹26,300 in the coming week.

Caution is required as the MCX-gold futures contract is approaching its crucial resistance zone. The ₹27,600-27,750 is a strong resistance zone that can halt the current rally in the contract. A reversal from here will have the potential to push the contract below ₹26,000. Traders can therefore square-off their long position near this resistance zone.

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

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