Gold likely to dip before reversing higher

Gold continued to remain range-bound and volatile for the second consecutive week. The yellow metal is stuck between $1,260 per ounce and $1,285 per ounce over the last two weeks. Within this range, it rose to the high of $1,284 on Thursday but fell back on the final trading day of the week to close at $1,270 per ounce, down 0.3 per cent for the week.

Silver reversed lower after marking a high of $17.24 to close the week 0.1 per cent lower at $16.84.

The gold and silver futures contract on the Multi Commodity Exchange (MCX) moved in tandem with global spot prices but fell more than them. A strong rupee kept the domestic futures contract under pressure by capping the upside.

The MCX-Gold futures has closed at ₹29,088 per 10 gm and was down 0.8 per cent for the week. The MCX-Silver futures contract, on the other hand, was down 0.3 per cent for the week and has closed at ₹39,048 per kg.

The outcome of the US Federal Reserve meeting on Wednesday and the US President naming Jerome Powell as the next Federal Reserve Chairman on Thursday made no impact on the market as both the events were in line with market expectations.

However, there was some volatility in the greenback on Friday after the jobs data was released.

The US added just 2,61,000 jobs in October as against the market expectation for an increase of 3,10,000. The revisions made for the previous two months (August and September) overshadowed the negative impact of the current data.

Though the dollar index fell initially after the jobs data release, it managed to claw back and closed on a positive note for the week.

The dollar index (94.94) is stuck in between 94.4 and 95 over the last one week.

However, the price action on the chart suggests that the index is getting strong support around 94.4.

This keeps the bullish outlook intact. It also increases the possibility of the index breaking above 95 in the coming days.

Such a break will take the index higher to 95.5 initially. A further break above 95.5 can then target 96.3 and 96.5. Bullish outlook for the dollar may continue to cap the upside in gold and keep it pressured on the downside.

The near-term view will turn negative if the index declines below 94.4. In such a scenario, an intermediate dip to 94 or 93.85 is possible. However, the region between 94 and 93.85 is a strong support zone which is likely to limit the downside in the short term.

The global spot gold ($1,270 per ounce) has been range-bound between $1,260 and $1,285 over the last couple of weeks. A breakout on either side of this range will decide the next move. If gold manages to break above $1,285, it can move up to $1,300 or $1,310.

But the bullish outlook for the dollar leaves the immediate bias bearish for gold. This leaves the possibility high of the yellow metal breaking below $1,260 in the coming days. Such a break can take gold lower to $1,251. However, a strong trend-line support is poised around $1,250 which is likely to halt the fall.

A strong upward reversal thereafter may have the potential to take the yellow metal back to $1,300 or even higher levels over the medium term.

MCX-Gold (₹29,088 per 10 gm) is hovering around some crucial supports poised in the ₹29,000-₹28,950 region and then at ₹28,860. A test of these supports in the near term cannot be ruled out. If the contract manages to reverse higher from any of these supports, a bounce to ₹29,250 can be seen. A strong breach above ₹29,250 is needed for the downside pressure to ease. Such a break will pave the way for a revisit of ₹30,000 levels.

On the other hand, if the contract declines below ₹28,860 in the coming days, it will increase the downside pressure and drag it to ₹28,700 and ₹28,300 thereafter.

The global spot silver ($16.84 per ounce) has come off after testing the 200-day moving average resistance at $17.24 in the past week.

Support is at $16.45, which is likely to be tested. If it manages to bounce from this support, an upmove to $17.20 is possible again.

On the domestic front, the MCX-Silver (₹39,048 per kg) futures contract has key supports near current levels at ₹39,000 and at ₹38,680. A break below ₹38,680 can drag the contract lower to ₹38,400.

On the other hand, if the MCX-Silver manages to bounce from ₹38,680 in the coming days, it can move up to ₹39,700 or even ₹40,000 in the short term.

COMMENT NOW