Gold and silver prices made good progress last week, thereby turning the near-term outlook positive. Another encouraging factor is that the November retail demand in India, one of the largest consumers of the yellow metal, remained robust according to latest World Gold Council (WGC) report. Nevertheless, India’s official gold imports came down to 72.1 tonnes in November – 19 per cent lower month-on-month according to WGC. But notably, it was 43 per cent higher compared to November last year. The Reserve Bank of India (RBI) added 2.8 tonnes of gold in November, taking the total gold reserves to 750.4 tonnes.

Apart from this, the net long positions on the COMEX too have been positive over the past couple of months. According to the latest Commitment of Traders (COT) report by the Commodity Futures Trading Commission (CFTC), the net longs stood at 704 tonnes. Although it is lower compared to 784 tonnes in November, speculators seem to remain upbeat.

In line with this, the performance of bullion was encouraging last week. Gold, in the international spot market, gained 0.8 per cent and ended at $1,797.7 per ounce. Silver appreciated by 0.9 per cent and closed at $22.35 per ounce. Similarly, on the domestic front, gold futures on the Multi Commodity Exchange (MCX) closed the week at ₹48,594 (per 10 grams), gaining nearly 1 per cent. The MCX Silver futures went up by 1.6 per cent and ended the week at ₹62,137 (per kg).

MCX-Gold (₹48,594)

The February futures of gold on the MCX, which was sluggish in the first half of last week, gained traction in the last two trading sessions. This resulted in the contract breaking out of the ₹47,400 - ₹48,550 range on the upside. The breach of ₹48,500 has turned the short-term outlook positive for the contract and it can be expected to gain more ground in the upcoming sessions.

Supporting the positive outlook, the relative strength index (RSI) and the average directional index (ADX) are showing fresh uptick on the daily chart. The moving average convergence divergence (MACD), which is currently in the neutral region, too is attempting to turn upwards. Moreover, the total number of outstanding open interest (OI) of all active futures of gold on the MCX increased to 11,523 contracts as on Friday from 11,025 contracts a week back. Weekly price gain along with increase in OI indicates long build-up.

The above factors clearly hint at bullish inclination and the contract can be expected to extend the rally from here. Although ₹49,600 can be a hurdle, the futures is likely to hit ₹50,000 within a couple of months. Resistances above this level are at ₹52,500 and ₹54,000. On the other hand, ₹48,000 can offer good support in case if the contract declines. Subsequent supports are at ₹47,400 and ₹46,500.

Given the bullish bias, traders can go long in gold futures at current levels with a stop-loss at ₹47,600. When the contract reaches ₹49,500, revise the stop-loss to ₹48,500. Exit at ₹50,000 because there might be a price correction from this level.

MCX-Silver (₹62,137)

Silver futures (March expiry) on the MCX, which was bearish so far, seems to be making a good attempt to reverse the trend. Even though it fell during the first half of last week, it gained significant upward momentum on Thursday, recovering all the intraweek losses. The rally extended and resulted in a first positive weekly close in the last five weeks. Since the contract has bounced off the psychological level of ₹60,000, there are good chances for the silver futures to rally beyond the hurdle at ₹62,500. The 21-day moving average (DMA) coinciding at this level means it is a crucial level.

There are positive signs as the RSI and the MACD, though remaining in the negative territory, are showing indications of an upward shift. However, as the contract rallied last week, the total number of outstanding OIs of all active silver futures came down to 11,573 contracts on Friday from 14,366 contracts a week back. Therefore, although there are positive signs, traders can wait for further bullish confirmation.

A breakout of ₹62,500 can firm up bulls’ hold which can lift the contract further upwards. The nearest resistance above ₹62,500 is at ₹64,100 – its 50-DMA. Subsequent resistance is at ₹66,250. On the other hand, if silver futures declines, it can find support at ₹60,000. Below that is the support band of ₹57,800 - ₹58,700.

Given the prevailing conditions, one can wait for now and initiate fresh long positions once the contract moves past ₹62,500 as this will turn the near-term outlook positive. Stop-loss can be at ₹60,500. When the contract rallies above ₹64,100, revise the stop-loss to ₹62,400. Liquidate the longs at ₹66,250.

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