Bullion Cues: Will gold and silver keep their shine?  

Akhil Nallamuthu |BL Research Bureau | Updated on: Mar 05, 2022

Precious metals breach key hurdles 

Gold and silver continued to rise on the back of safe-haven demand. As the talks between Russia and Ukraine failed, the market was kept on the toes and there has been considerable volatility. The international spot price of gold and silver appreciated by 4.3 and 6.1 per cent to end the week at $1,968.5 and $25.67 per ounce, respectively. This is the highest weekly close since the first week of August 2020.

Similarly, gold and silver futures on the Multi Commodity Exchange (MCX) appreciated 4.7 and 6.6 per cent to end the week at ₹52,559 (per 10 grams) and ₹69,160 (per kg), respectively.

On the fundamental front, there are mixed signals. The demand for gold ETFs (Exchange Traded Funds) continue to improve whereas the latest data by the World Gold Council (WGC) shows that the central banks dumped the yellow metal in January this year. The data shows that the global reserves fell by 12 tonnes in the first month of this year. But interestingly, the Reserve Bank of India (RBI) purchased 1 tonne in January taking the total gold reserves to 755 tonnes. In February, till 18th, the RBI had added further 2.2 tonnes.

MCX-Gold (₹52,559)

The April futures of gold on the MCX appreciated and closed above the key resistance of ₹52,500 last week. Thus, the bulls are clearly in the driving seat and so, further increase in price is highly likely. On the upside, the nearest notable resistance is seen at ₹56,000. A breakout of ₹56,000 can lift the price to ₹60,000. On the other hand, if the trend reverses, ₹52,500 will offer good support for the contract. Subsequent support is the price band of ₹50,000-50,500.

Given that the trend is bullish and that the resistance at ₹52,500 is breached, traders can be bullish. We had been carrying the long positions for the past couple of weeks. The stop-loss of those longs are at ₹49,500 with a target at ₹56,000. One can continue to hold these positions. Fresh buys can also be initiated with above-mentioned stop-loss and target levels.

MCX-Silver (₹69,160)

The May silver futures gained last week and ended above the key resistance at ₹68,500. It has also moved above the 200-day moving average (DMA) last week and these factors has opened the door for further strengthening. While ₹70,000 can be a barrier, given the current upward momentum, the contract will most probably ease past this level and touch the price band of ₹73,000-73,500. Subsequent resistance is at ₹76,500. On the downside, the contract is likely to find support at 200-DMA, which is currently at ₹66,350. Below this, ₹65,000 is a considerable support.

On the back of the bull trend, traders can now consider fresh longs. That is, buy at current level and on a dip to ₹66,350 with initial stop-loss at ₹64,700. When the contract reaches ₹73,500, revise the stop-loss to ₹69,500. Liquidate the longs when price touches ₹76,000.

Published on March 05, 2022
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