Bullion Cues. Gold reverses higher as dollar eases

Gold price, as expected, fell initially in the past week, to a low of $1,241. However, the US dollar weakening in the later part of the week aided the yellow metal to reverse sharply higher from this low and recover the loss made during the week.

The global spot gold has closed the week marginally higher at $1,256 per ounce.

Silver, on the other hand, fell to an intra-week low of $16.35 per ounce. The prices reversed higher from this low, recovering all the loss and closed the week on a flat note at $16.7 per ounce.

On the domestic front, a weak rupee limited the downside in the gold and silver futures contract on the Multi Commodity Exchange when global spot gold and silver prices fell in the initial part of the week. The MCX-Gold futures contract dipped to a low of ₹28,448 per 10 gm and reversed higher from there to close slightly higher for the week at ₹28,734 per 10 gm.

The MCX-Silver contract, on the other hand, fell to a low of ₹37,977 per kg and bounced back from there to close the week at ₹38,488 per kg.

The dollar index (97.30), reversing lower in the past week, offered respite to gold and silver prices which had fallen sharply in the previous two consecutive weeks. The index rose to a high of 97.87 by Tuesday and fell-back to close the week at 97.30. The index traded under pressure despite good housing data releases in the past week. For the coming week, the GDP numbers scheduled for release on Thursday will be key data to watch. Apart from that, US consumer confidence, personal income, personal consumption expenditure are other key data releases from the US due for the coming week.

The immediate outlook for the dollar index is negative with resistance at 97.5. A dip to test 97 is likely in the near term. A break below 97 can take the index lower to 96.45, a key support level for the index. A bounce from 96.45 can keep the dollar index range-bound between 96.45 and 98 for some more time and can take the index higher to 97 and 98 levels once again.

Such a bounce in the dollar index may restrict the upside in the bullion price. But a strong break below 96.45 can take the index lower to 96 initially. A further break below 96 can drag it to 95 thereafter. Such a fall in the dollar index may aid the gold prices to revisit and even break above $1,300 levels, going forward.

The global spot gold ($1,256 per ounce) has an immediate resistance at $1,260. Inability to break above this hurdle can see prices dipping to $1,250. In such a scenario, a range-bound move between $1,250 and $1,260 is possible for some time. A break above $1,260 can see the prices rising to $1,270. A further break above $1,270 can take gold prices higher to $1,275 or $1,280 thereafter. A strong break above $1,280 is needed for the yellow metal to gain momentum and revisit $1,300 levels. Supports are at $1,250 and $1,245. The bullion will come under pressure only if it falls decisively below $1,245. Such a break can take it lower to $1,240 and $1,235.

On the domestic front, the MCX-Gold (₹28,734 per 10 gm) reversed higher last week after taking support from the 100-week moving average around ₹28,450. A cluster of moving average resistances are poised between ₹28,835 and ₹28,950. A rise to test ₹28,950 is likely this week.

But whether the contract manages to break above ₹28,950 or not will decide the next move. Inability to break above ₹28,950 can pull it back to ₹28,450. In such a scenario, a range-bound move between ₹28,450 and ₹28,950 is possible for some time.

A strong break above ₹28,950 can take the MCX-gold contract higher to ₹29,200. On the other hand, a fall below ₹28,450 can drag it to ₹28,150 or ₹28,000.

The global spot silver ($16.7 per ounce) has an immediate support at $16.5. If the prices sustain above this support, a rise to $16.85 or $17 is possible this week. Inability to break above $17 can trigger a pull-back move to $16.5. But if silver prices rise past $17, they can extend up-move to $17.35 and $17.5. On the other hand, if the prices decline below the immediate support at $16.5, it can fall to $16.35 and $16 in the coming days.

On the domestic front, the MCX-Silver (₹38,488 per kg) futures contract can rise to test its immediate resistance at ₹38,950. A strong break above this hurdle can boost the momentum and take the contract further higher to ₹39,550 or ₹39,700 thereafter. Key support for the contract is at ₹37,800.

The outlook will turn negative only if the contract declines below this support. Such a break will increase the likelihood of the contract falling to ₹37,000 or ₹36,850.

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