Gold and silver rallied in the first half of last week. While the former gave up almost all the gains towards the end of the week, the latter managed to hold on to the gains relatively better.

In the international spot market, gold closed at $1,798.5 an ounce compared with the preceding week’s close of $1,792.3. In the domestic market, the gold futures (February expiry) on the Multi Commodity Exchange (MCX) ended the week at ₹54,574 (per 10 gram) compared with the preceding week’s close of ₹54,300.

On the other hand, silver, in terms of dollar, was up 2.3 per cent and wrapped up the week at $23.75 per ounce. Similarly, silver futures (March series) on the MCX gained 2 per cent as the contract closed the week at ₹69,033 per kg.

While the US treasury yields rose to 3.75 per cent on Friday compared with 3.5 per cent by the end of the previous week, the bullion remained largely unaffected last week as the dollar saw a marginal decline.

Fundamentally, the global gold ETFs (Exchange Traded Funds) continue to see outflow. The net outflow for the week ended December 16 stood at 5.1 tonnes, according to WGC (World Gold Council) data. However, speculators retain the positive bias as the net long position on the COMEX stands at nearly 443 tonnes on December 20, highest since April 16.

MCX-Gold (₹54,574)

While the February gold futures went up to mark an intra-week high of ₹55,220, it could not decisively breach the resistance at ₹55,000 as it closed at ₹54,574.

But unlike the week before the last, when the cumulative Open Interest (OI) saw an increase, it decreased last week. The OI stood at 16,921 contracts on Friday compared with 17,801 contracts by the end of the preceding week. This means, participants are moving out because of the lack of trend.

The loss in momentum is also indicated by the RSI and the MACD on the daily chart.

This week, we expect the contract to oscillate within ₹54,000 and ₹55,000. If gold futures break out of ₹55,000, it can witness another leg of rally, potentially to ₹57,000. On the other hand, if the contract falls below ₹54,000, it might decline to ₹52,700.

Trade strategy: Stay on the sidelines for now. Initiate longs only if the contract breaks out of ₹55,000. For this trade, the target is ₹57,000 and the stop-loss is at ₹54,000.

Silver lining
The silver futures should break out of ₹70,000 decisively to establish the next leg of uptrend
MCX-Silver (₹69,033)

The March silver futures rallied and marked a high of ₹70,062 on Wednesday. But it could not invalidate the resistance at ₹70,000 as it ended the week lower at ₹69,033.

Nevertheless, the contract produced a weekly gain and the cumulative OI increased, indicating a long build-up. However, the silver futures should break out of ₹70,000 decisively to establish the next leg of uptrend. If such a breakout occurs, the contract can quickly rally to ₹73,000, its nearest hurdle.

But if the contract declines on the back of the resistance at ₹70,000, it can find support at ₹67,000 and at ₹65,120.

That said, in the coming week, we expect the silver futures to consolidate between ₹67,000 and ₹70,000.

Trade strategy: Last week, we advised to make some modifications in target and stop-loss levels for the longs taken at ₹66,450. The revised target of ₹69,500 was hit early last week.

For the coming week, we suggest staying on the sidelines. In case the contract breaches ₹70,000, take fresh longs with stop-loss at ₹68,300. Book profits at ₹73,000. Note that this is a short-term trade recommendation.

Related Topics
comment COMMENT NOW