Gold was muted on a weekly closing basis although it saw some intra-week volatility. In the international spot market, it closed at $1,792.3 an ounce compared with the preceding week’s close of $1,796.6. In the domestic market, the gold futures (February expiry) on the Multi Commodity Exchange (MCX) ended the week on a flat note at ₹54,300 (per 10 gram) compared with the preceding week’s close of ₹54,295.
On the other hand, silver, in terms of dollar, was down 1.1 per cent and wrapped up the week at $23.21 per ounce. Similarly, silver futures (March series) on the MCX lost 0.6 per cent as the contract closed the week at ₹67,650 per kg.
The dollar and the US treasury yields too were largely stable over the past week.
On the fundamental front, the global gold ETFs (Exchange Traded Funds) saw net outflow of 5.6 tonnes for the week ended December 9. This is despite the price appreciating that week. So, even though the sentiment has been improving of late, the yellow metal is yet to get the full confidence of investors.
As the February gold futures ended the week flat, the cumulative Open Interest (OI) of the gold futures on the MCX went up a little to 17,801 contracts from 17,642 contracts over the past week. Thus, the bulls, which lifted the price since early November are still in the game.
However, there is a loss in upward momentum which is indicated by the RSI and the MACD on the daily chart. So, we can expect a minor decline or some sort of consolidation for the rest of the month. A drop below ₹53,000 is not likely. But note that such a break can turn the near-term outlook negative.
From the current level of ₹54,300, the contract has support at ₹53,600 and ₹53,000.
However, if gold futures break out of ₹55,000, it can witness another leg of rally, potentially to ₹57,000
Trade strategy: Our buy recommendation had a target of ₹55,000 which the February futures hit last week. Stay on the side lines 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.
The March silver futures rallied to make an intra-week high of ₹69,575 before declining and closing the week at ₹67,650. On a weekly basis, it underperformed gold futures by losing 0.6 per cent. Along with a price drop, the cumulative OI of silver futures on the MCX decreased to 20,126 contracts on Friday compared with 21,805 contracts a week ago. A price drop along with a decrease in OI indicates long unwinding.
Like in gold futures, we might see a decline or consolidation in silver as well in the next couple of weeks.
From the current level, the nearest notable support levels for silver futures are at ₹65,120 and ₹64,000. Subsequent support is at ₹62,400. A decline below ₹62,400 can turn the trend bearish.
On the other hand, if the contract breaches the resistance at ₹70,000, we can expect a quick rally to ₹73,000.
Trade strategy: The target for the long position we suggested at ₹66,450 is ₹70,000. Since the contract made a high of ₹69,575, this was not triggered. Since there is a chance for correction, we are advising you to make some adjustments. Revise the target down to ₹69,500. Also, tighten the stop-loss up from ₹65,500 to ₹66,500.