Gold remained flat last week, whereas silver prices rallied. In terms of dollar, the former ended with a marginal gain of 0.1 per cent at $1,925 per ounce, whereas the latter appreciated 2.3 per cent to end the week at $23.5 an ounce.
Similar trend was seen in the domestic market. On the MCX, gold futures was down 0.1 per cent, as it ended the week at ₹58,946 (per 10 gram); silver futures gained 1.6 per cent to close at ₹73,337 (per kg).
The price action since July shows that gold futures (October expiry) has been forming lower highs and higher lows leading to the formation of a triangle pattern. Hence, the next leg of trend depends on the direction in which the contract moves out of this pattern.
If it breaks out on the upside, it will open the door for a rally to ₹60,350. But if gold futures slip below the rising trendline, we might see a decline to ₹57,500.
Trade strategy: Since there is no clarity on trend, we recommend staying out of the market. Traders can initiate positions along the direction of the break of the triangle pattern.
Silver December futures, after marking a low of ₹70,062 on September 14, saw a rebound in price. The contract extended the upside last week, giving some hope for the bulls.
But note that the silver futures is now held within a broad range of ₹70,000 and ₹76,600. Within this range, the contract is now trading at ₹73,337. It has a resistance at ₹74,000.
So, for the rally to continue, the hurdle at ₹74,000 should be breached. In such a case, it can move back up to ₹76,600. On the other hand, if the contract drops, it can find support at ₹71,050 and ₹70,000.
Trade strategy: Risk-reward is not favourable for longs even though there is a chance for a rally. Hence, refrain from trading.