The gold futures contract traded on the Multi Commodity Exchange (MCX) witnessed some volatile swings in the past week. The contract fell to a low of ₹26,350/10 gm dragged by the sharp fall in the global spot gold price.

However, it has recovered from there and currently trades at ₹26,800. Rupee falling below the 64-mark on Monday coupled with a recovery in the global prices has helped the domestic futures contract to move higher. But with the presence of a strong resistance at ₹27,000 the current recovery to sustain remains uncertain.

Whether the contract breaches this hurdle or not will decide the next move. So traders can stay on the sidelines and wait to get a clear trade signal.

Inability to break above ₹27,000 and a reversal can put the contract under pressure once again. The contract can then fall to ₹26,500 and ₹26,000. Traders can use such a reversal to take short position at ₹26,800. Stop-loss can be kept at ₹27,150 for the target of ₹26,350.

On the other hand, a strong break above ₹27,000 could add bullish momentum. Such a break can take the contract higher to ₹27,700.

On the global front, the spot gold ($1,172/oz) has declined below the important support at $1,180. Although the price has reversed higher from last week’s low of $1,162, it has strong resistance in the range of $1,180-1,190 which can limit the upside.

Having said this, a fall to $1,150 looks likely in the short-term as long as the bullion price stays below this resistance zone.

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

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