In terms of dollars, gold and silver depreciated 1.5 per cent and 2.1 per cent to end the week at $1,946 and $23.3 per ounce, respectively. Similarly, on the Multi Commodity Exchange (MCX), gold futures lost 2 per cent and silver futures lost 2.9 per cent to close the week at ₹59,560 (per 10 gram) and ₹71,229 (per kg), respectively.
The sell-off in the second half of last week resulted in the August futures of gold on MCX drop below the key support at ₹60,000. Thus, the trend has turned bearish for the short term and we might see more declines in the coming sessions.
Considering that the price action on the daily chart resembles a confirmed double-top pattern, the indication is that the contract could fall to ₹58,000. But if there is a rally from the current level, chances for it to extend above ₹61,000 is less likely.
Trade strategy: Short gold futures at the current level of ₹59,560. Add more shorts in case the price rises to ₹60,000. Keep initial stop-loss at ₹61,000.
When the contract touches ₹58,500, tighten the stop-loss to ₹59,500. Book profits at ₹58,050.
The July silver futures closed below an important support at ₹72,000 last week, showing that the downward momentum remains strong. Looking at the chart, the probability of a fall to ₹67,300 appears high. Although there is a support at ₹70,000, it may not be able to stop the bears.
If the contract recovers, it will face barriers at ₹72,000 and ₹73,000. The chances are low for a rally past ₹73,000 this week.
Trade strategy: Sell silver futures now at ₹71,229. In case the price inches up to ₹72,000, add more short positions. Place stop-loss at ₹73,200 initially. Shift it down to ₹70,000 when the contract falls to ₹68,500. Exit the shorts at ₹67,500.