Bullion cues. Brief breather for bullion

Gold prices fell for the fourth consecutive week, but selling momentum seemed to slow after the extended spell of losses. Global spot gold prices fell to $1,074 per ounce on Thursday and recovered low to close at $1,083.91 on Friday, ending the week almost flat (down 0.54 per cent). Though the terrorist attacks on Paris roiled the world at the fag end of the trading session, the reaction to that event was muted. Going forward, if at all there is any rush towards gold as a safe haven, this may come about only after the political repercussions of the attack become clear over the next couple of weeks.

There were no major data releases from the US except for the retail sales data which came in on Friday. The expectation of a December rate hike from the US Federal Reserve kept the gold markets in suspense, but the constant flip-flops on this issue seem to be leading to market fatigue, with the news having less impact of late.

But other precious metals recorded strong moves last week, mainly on Fed news. Silver and platinum tumbled in the past week, unlike gold. Silver fell 3.5 per cent to close at $14.26 per ounce. Platinum tanked 8.7 per cent to close the week at $859.5 per ounce. On the domestic front, both the gold and the silver futures contract traded on the Multi Commodity Exchange (MCX) fell for the fourth consecutive week, with any Diwali-related buying making no impact on prices. Since it was a very short trading week due to festival holidays, the domestic prices were largely influenced by global price movements. MCX gold futures contract fell 0.6 per cent and has closed at ₹25,372 per 10 gm. The silver contract closed down by 3 per cent at ₹33,845 per kg last week.

While the markets will watch for the political fallout of the Paris attacks, this week is also packed with important data releases from the US. Industrial production and the consumer price index inflation data will be released on Tuesday. This will be followed by the housing starts number and the minutes of the US Federal Reserve’s October meeting on Wednesday. The regular weekly unemployment claims data is due on Thursday.

The rally in the dollar index (99) paused last week and it was range-bound. But any strong data release from the US this week could trigger a fresh rally in the index, pressuring gold. On the charts, the dollar index has strong support in the 98.50-98 zone, which is likely to limit the downside. A test of the psychological resistance at 100 is possible in the coming days. A strong break above 100 will open the doors for a fresh rally to 101.80 — a key 61.8 per cent Fibonacci retracement resistance level.

The price action on the charts last week reflects indecisiveness in the market. However, the view remains bearish as long as the price trades below the resistance at $1,100. A fall to test the next support at $1,065 is possible in the coming days.

A further break below $1,065 can drag the yellow metal lower to $1,055 and $1,050.

Key resistance is in the $1,100-$1,110 zone. The downside pressure will ease only if the gold price breaks above $1,110. The next targets will be $1,135 and $1,150.

On the domestic front, the MCX gold futures contract has resistance at ₹25,550. As long as the contract trades below this resistance, a fall to ₹25,150 and ₹25,000 cannot be ruled out this week. Significant support for the contract is in the ₹25,000-₹24,900 zone. A strong bounce from this support zone could halt the downtrend and trigger a reversal rally to ₹25,500 or even ₹26,000 thereafter. But if the contract extends its fall below ₹24,900, then it can target ₹24,500.

The MCX silver futures contract has resistance at ₹34,500. The outlook is bearish. A fall to ₹33,300 looks likely in the coming days. A further break below ₹33,300 will see the contract extending its fall to ₹33,150 and ₹33,000 thereafter. The downside pressure will ease only if the contract manages to breach above ₹34,500 decisively. Such a break can take the contract higher to ₹35,000 and ₹35,500.

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