Gold gained for the fourth consecutive week as the dollar remained weak. In the international spot market, the yellow metal appreciated 1.5 per cent to end the week at $1,801 per ounce. Similarly, in the domestic market — on the MCX (Multi Commodity Exchange) the gold futures contract went up 1.4 per cent and closed the week at ₹52,585 per 10 gram.
Silver also gained. It was up 4.6 per cent in the international market and ended the week at $20.8 an ounce. The silver futures on the MCX rose 3.3 per cent to wrap up the week at ₹59,276 per kg.
On the fundamental side, imports of gold in India dropped 41 per cent year-on-year in July, as it stood at 42.5 tonnes due to weak retail demand, as per the World Gold Council (WGC). Yet, the demand seems to have been picking up in August, according to WGC. On the other hand, the Indian gold Exchange-Traded Funds witnessed a net outflow of nearly 1 tonne last month. However, the Reserve Bank of India added gold amounting to 13.4 tonnes to its kitty in July, increasing the total gold reserves to 783 tonnes.
Gold futures extended the rally last week. Since it closed at ₹52,585, it has not moved out of the range of ₹50,000-52,600.
But there are some positive signs. The contract has gained for the fourth week in a row, hinting at good momentum. Also, the outstanding cumulative open interest (OI) of gold futures on the MCX has gone up to 18,937 contracts on Friday compared to 15,615 contracts a month ago. A rise in price along with an increase in OI is a bullish signal.
So, the chances are high for the contract to break above ₹52,600 this week. It can potentially rally to ₹54,000 quickly and even to ₹55,000. But if price declines, the contract can find support at ₹51,650 and ₹51,220 – its 50-day moving average (DMA). But note that the short-term bias is now bullish.
Although silver futures rallied last week and moved above a falling trendline barrier, it is still trading within the resistance band of ₹58,500-60,000. But unlike long build-up in gold futures, silver futures has witnessed short covering as the cumulative OI of silver futures stood at 15,923 contracts on Friday compared to 23,007 contracts a month ago. Therefore, the rally can be weak and the likelihood of the contract breaking out of ₹60,000 is low.
That said, if gold futures rally, it can have a positive impact on silver futures also leading to a breakout of ₹60,000. In such a case, the silver futures could move up to ₹63,500 and then possibly to ₹65,000. On the other hand, if the contract declines from here, it can find support at ₹57,300. Subsequent support is at ₹55,000.