Are gold-en days ahead for bullion?

Akhil Nallamuthu |BL Research Bureau | Updated on: Feb 19, 2022

Silver is likely to underperform gold 

Gold seems to be getting its sheen back as it hit a new eight-month high in dollar terms ($1,902.8) and one-year high in the domestic market (₹50,438). Geo-political concerns and higher inflation seem to be supplying enough energy to keep the gold bulls going.

The interest in this precious metal is improving and seems to be drawing investors. Global ETFs (Exchange Traded Funds) have seen a net inflow of 57.3 tonnes this year, as on February 11 .

Overall, the yellow metal seems to be gaining good traction of late. Silver, on the other hand, appears o be lagging. Though it gained for the week, unlike gold, silver did not scale to new heights.

To sum up, gold and silver in the international market gained 2 and 1.6 per cent and ended the week at $1897.6 and $23.93 per ounce, respectively. Likewise, gold and silver futures on the Multi Commodity Exchange (MCX) appreciated 2 and 1.5 per cent to end the week at ₹50,112 (per 10 grams) and ₹63,902 (per kg), respectively.

MCX-Gold (₹50,112)

The April futures of gold on the MCX closed the week above the critical level of ₹50,000 last week. This is likely to entice more buyers, which can push the prices further up. The breakout above ₹50,000 has confirmed an ascending triangle pattern, which also indicates an upswing from here.

While the nearest resistance is ₹52,250, the triangle pattern suggests a rally to ₹56,000. Last week, we recommended buying MCX-Gold futures at around ₹49,100 and on a dip to ₹48,650 with stop-loss at ₹48,000. The idea was to exit at ₹52,000. But given the current momentum and the development on the charts, a rally to ₹56,000 look highly likely. Therefore, traders can exit one-third of their longs at ₹52,000 and carry the remaining for a target of ₹56,000. Maintain the stop-loss at ₹48,000 for now and move it to ₹49,900 when the contract breaches ₹52,250. Fresh longs too can be executed with above-mentioned stop-loss and target levels.

MCX-Silver (₹63,902)

The March silver futures, which sustains above the key level of ₹62,500, is lagging gold futures. However, the outlook for the metal is positive and will most probably appreciate in the coming weeks, although not at the same pace of gold. The nearest hurdle can be spotted at ₹65,500. Nevertheless, the contract can be expected to rise to ₹67,000. On the downside, the support at ₹62,500 is expected to give good protection.

Last week, we advised that traders could consider longs in MCX-Silver futures with stop-loss at ₹61,450. The recommended target was at ₹67,000 since the price band of ₹67,000-68,300 is a considerable resistance brand. One can retain the long positions with same stop-loss and target levels.

Published on February 19, 2022
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