Gold continued its ascent last week as the dollar depreciated. The international spot price of gold was up 2.9 per cent as it closed at $1,920.2 per ounce on Friday. In the domestic market, the gold futures (February expiry) on the Multi Commodity Exchange (MCX) gained 1 per cent to end the week at ₹56,324 (per 10 gram).
Silver made less gains. The price of global spot silver was up 1.8 per cent last week as it ended at $24.25 per ounce. On the MCX, the silver futures (March series) closed the week at ₹69,427 (per kg), up 0.4 per cent.
The gain in terms of rupee was less last week as the Indian currency appreciated 1.7 per cent versus the dollar.
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The MCX gold futures hit a fresh all-time high of ₹56,370 on Friday before wrapping up the session little lower at ₹56,324. The price action continues to be bullish and notably, the continuous contract of gold on the MCX has posted a gain for 11th week straight, indicating strong momentum.
We expect the contract to hit ₹57,000 this week. A breach of this can lift the price further to ₹58,000. As price went up, the cumulative Open Interest (OI) of gold futures on the MCX increased to 21,082 contracts on Friday versus 18,652 contracts by the end of the preceding week. Thus, fresh long build-up continues to occur.
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On the other hand, if there is a decline, it can find support at ₹56,000 and ₹55,000.
Trade strategy: As per our suggestion, traders would now be holding longs initiated at ₹55,000 with revised stop-loss at ₹54,500. Continue to hold the longs, but tighten the stop-loss further to ₹55,200. Exit at ₹57,000.
The March silver futures appreciated 0.4 per cent last week. However, it remains below the key ₹70,000-level. On the other hand, it has not fallen either and stays above the support of ₹67,000. Although there was some long build-up over the past week, it does not appear very significant. A clear breach of ₹70,000 will only increase the chances of a rally.
If the bulls can lift the price above ₹70,000, we might see a rally to ₹73,000. But if the support at ₹67,000 is invalidated, there could be a quick fall to ₹64,000. Overall, the contract should breach either ₹67,000 or ₹70,000 to establish a trend.
Trade strategy: Stay out. Take fresh longs above ₹70,000. Target and stop-loss for this can be ₹73,000 and ₹68,300 respectively.