Bullion prices went up as the US dollar retreated from its highs last week. More than gold, silver seems to have made use of the dollar weakness as it outperformed the yellow metal last week. Gold on the international spot market gained 0.4 per cent to end at $1,717.6 an ounce, whereas silver appreciated 4.6 per cent to close the week at $18.85 per ounce.
Similarly, in the domestic market, gold futures (October expiry) on the Multi Commodity Exchange (MCX) was up 0.3 per cent as it closed at ₹50,529 (per 10 gram) on Friday. Silver, on the other hand, went up 3.8 per cent to close the week at ₹55,050 (per kg).
The overall sentiment of investors on the yellow metal does not seem to improve. The data by the World Gold Council (WGC) shows that the global gold ETFs (exchange-traded funds) saw a net outflow of 6.2 tonnes for the week ending August 26. Also, the net long positions on gold futures on the COMEX continues to remain below 500 tonnes, hinting at an inherent bearishness.
Nevertheless, with all the above developments, charts show that gold continues to stay in a range, whereas silver appears bearish despite last week’s rally.
Although the October gold futures on the MCX was up 0.4 per cent last week, the price action shows that it was largely trading in a narrow sideways range of ₹50,000-50,700. So, the support at ₹50,000 remains valid and so does the broader range of ₹50,000-52,600. But the price is below both the 20- and 50-day moving averages (DMAs) showing a bearish inclination. However, we can assume the next leg of trend based on the direction of the breach of the ₹50,000-52,600 range.
If the existing bearish bias strengthens resulting in the contract slipping below ₹50,000, it can see a quick drop to ₹47,700 initially and then to ₹46,000, which are the notable supports. On the other hand, if the contract rallies from the current level, it has a strong hurdle at ₹52,600. If this is taken out, the trend will turn bullish, and it can lift gold futures up to ₹55,000 swiftly.
The December silver futures on the MCX rallied last week to almost nullify the decline it saw in the preceding week. However, the contract, currently hovering around ₹55,000, has a strong barrier at ₹55,500.
Last week, we indicated that there could be a rally, but it may not take the contract beyond ₹55,500 and these up-moves can be seen as an opportunity to short. Notably, the 20-DMA is currently at ₹55,680 and thus, the price band of ₹55,500-55,680 is a considerable resistance band. Therefore, from here, the silver futures will most likely resume the downtrend.
It will most probably retest the prior low of ₹51,857 in the next couple of weeks. A break below ₹51,800 can accelerate the fall. Supports below ₹51,800 are at ₹50,000 – psychological level – and ₹48,000.