Bullion Cues: Where are gold and silver headed?

Akhil Nallamuthu |BL Research Bureau | Updated on: Feb 12, 2022

Short-term trend turns bullish for both precious metals

The January US Consumer Price Index (CPI) inflation stood at 7.5 per cent as per the latest data by the Bureau of Economic Analysis (BEA), topping the market expectation of 7.3 per cent. This is also higher sequentially as December inflation was 7 per cent. While this is supportive for bullion prices as the expectation of faster rate hikes by the US Fed grows, both gold and silver has been gaining right from the beginning of last week. Another factor supporting the bullish undertone was that the National Bank of Poland announced last week its intentions to add 100 tonnes of gold this year.

Against this backdrop, gold and silver price in the international market appreciated by 2.8 and 4.8 per cent to end the week at $1,858.6 and $23.56 per ounce respectively. Gold gaining the safe haven status on the back of the Russia-Ukraine political uncertainty is also one of the factors to push the prices higher last week.

On the Multi Commodity Exchange (MCX), gold futures (April expiry) gained 2.5 per cent to end at ₹49,114 (per 10 grams) and silver futures (March series) posted a gain of 3.5 per cent to close at ₹62,988 (per kg).

MCX-Gold (₹49,114)

The April futures of gold on the MCX broke out of the range of ₹47,400-48,550 last week, turning the outlook positive. Supporting the bullish inclination, the relative strength index (RSI) and moving average convergence divergence (MACD) on the daily chart are showing fresh uptick. Therefore, gold futures on the MCX is set to move higher in the forthcoming sessions.

Nevertheless, the contract could see a corrective decline to ₹48,650 before appreciating. On the upside, the contract is likely to rally past ₹50,000-mark and touch ₹51,800 in the near-term. Subsequent resistance is at ₹52,500. Hence, traders can go long now and accumulate if the price dips to ₹48,650. Stop-loss can be placed at ₹48,000. The price band of ₹51,800-52,500 is a resistance. So exit the longs at ₹52,000. Fresh trades then on can be decided based on how the contract reacts at that juncture.

MCX-Silver (₹62,988)

Silver futures i.e., March series breached the critical resistance at ₹62,500 and thus, the contract is forecasted to make more gains in the upcoming sessions. On the upside, the nearest notable resistance can be spotted at ₹65,500. A breakout of this level can lift the contract to the resistance band of ₹67,000-68,300. The support at ₹62,500 is likely to arrest the declines below this level. So, traders can buy MCX-Silver futures now with stop-loss at ₹61,450. Exit the longs when the contract rallies to ₹67,000.

Published on February 12, 2022
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