Bullion Cues: Will gold inch up?

Akhil Nallamuthu | | Updated on: Jul 02, 2022

Silver turns bearish

Gold prices dropped in the international market, as India, the second-largest consumer of gold, unexpectedly increased import duty to fight the expanding trade deficit. Gold spot depreciated 0.9 per cent to close the week at $1,810.2 an ounce. On the other hand, silver spot dropped by a significant 5.8 per cent to end the week at $19.87 per ounce.

As the import tax in India was increased from 10.75 per cent to 15 per cent, the prices fared comparatively better in the domestic market. Gold futures on the MCX (Multi Commodity Exchange) posted a weekly gain of nearly 2.6 per cent to wrap up the week at ₹51,917 (per 10 gram), whereas silver futures lost about 3.4 per cent last week to end at ₹57,742 (per kg).

Take note
As the import tax on gold was increased, yellow metal prices dropped in the global market while they fared comparatively better domestically

Despite the deviation in performance in gold between the global and domestic market prices last week, the overall trend will remain the same. Although prices dropped, gold spot in the international market is above a support level and that means, this week can be positive for the yellow metal.

MCX-Gold (₹51,917)

The August futures of gold on the MCX gained last week and closed above the resistance at ₹51,800. This gives the contract some positive bias and there is a good chance for it to appreciate from here. This week, it could go past the intermediate hurdle at ₹52,000 and rally to ₹53,000. A breach of this can lift it up to ₹53,700.

Supporting the positive bias, the cumulative open interest (OI) of gold futures on the MCX increased to 16,326 contracts on Friday compared to 15,883 contracts a week ago. An increase in price along with an increase in OI shows bullish build-up.

On the other hand, if gold futures decline from here, it can find supports at ₹51,000 and ₹50,000. The 200-day moving average (DMA) coincide at ₹50,000 making the support stronger and so, a decline below ₹50,000 this week is less likely.

MCX-Silver (₹58,175)

The September futures of silver on the MCX declined last week and it closed at ₹58,175. But the nearest expiry — July series, which expires on Tuesday, closed at ₹57,742 thereby breaching the crucial support ₹58,000. This has turned the trend bearish and hence, prices are expected to drop this week as well.

Corroborating the bearish inclination, the cumulative OI of silver futures on the MCX increased to 20,594 contracts on Friday as against 16,381 contracts a week ago, indicating short build-up. In fact, this short build-up has been seen over the past couple of weeks.

Therefore, September futures is expected to decline to ₹55,000 – a support – in the short run. Subsequent support is at ₹53,000. Alternatively, if the contract recovers, it can face hurdles at ₹60,000 and ₹61,360.

Published on July 02, 2022
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