Gold produced a gain in the first week of trading in 2023. The spot price of gold in the international market closed the week at $1,865.7 an ounce, up 2.3 per cent. In the domestic market, the gold futures (February expiry) on the Multi Commodity Exchange (MCX) gained 1.3 per cent to end at ₹55,743 (per 10 gram).
On the other hand, silver underperformed the yellow metal as the price of global spot silver dropped 0.7 per cent to end the week at $23.81 an ounce. Similarly, silver futures (March series) on the MCX fell 0.4 per cent over the last week as it closed at ₹69,155 (per kg).
Here’s an analysis based on charts and our recommendation on what traders can do.
The February gold futures appreciated to hit an intra-week high of ₹56,010 last Wednesday before wrapping up the week at ₹55,743, gaining 1.3 per cent for the week. Interestingly, gold futures never produced negative weekly returns since the week ended October 28, indicating strong positive momentum.
Last week, it closed above the resistance at ₹55,000 and so, the chance for more move upwards is high.
The fund flows are indicating the same positive sentiment. The cumulative Open Interest (OI) of gold futures on the MCX has risen to 18,652 contracts by the end of last week compared with 16,921 contracts on December 23. This indicates a fresh long build-up over the past two weeks.
Therefore, the gold futures are likely to rally to ₹57,000 soon. A breach of this level can lift it further to ₹58,000. On the other hand, there are good supports at ₹55,000 and ₹54,000.
Trade strategy: A fortnight ago, we suggested initiating fresh longs if the contract breaks out of ₹55,000 with stop-loss at ₹54,000. Traders who have initiated this position can hold it. But tighten the stop-loss to ₹54,500. Liquidate the longs if the price touches ₹57,000.
The March silver futures surpassed the critical ₹70,000-mark early last week to hit a fresh high of ₹71,120. However, the rally could not sustain as the contract closed the week at ₹69,155. Although the overall trend remains bullish, we are likely to see a consolidation in the near-term where silver futures could stay within ₹67,000 and ₹70,000.
As the contract has largely been moving across a sideways trend over the past couple of weeks, there is a slight loss of interest among the participants. The cumulative OI dropped to 21,119 contracts on Friday as against 22,550 contracts on December 23.
So, silver futures need fresh thrust to breach ₹70,000. If this level is decisively breached, we could see a swift rally to ₹73,000. On the other hand, if the support at ₹67,000 is invalidated, bears can drag the contract to ₹64,000.
Trade strategy: At this juncture, we suggest staying on the sidelines. In case the contract breaches ₹70,000, take fresh longs with stop-loss at ₹68,300. Book profits at ₹73,000. Note that this is a short-term trade recommendation.