Gold snaps out of a losing trend

After falling more than 3 per cent over two weeks, gold prices managed to reverse higher last week. The yellow metal bounced back to close 1.3 per cent higher last week at $1,228.7 per ounce. Prices began edging higher since the beginning of the week. However, the reversal gained momentum on Friday due to weak data release from the US. Silver, on the other hand, snapped its five-week fall by surging 2.4 per cent last week to close at $15.99 per ounce.

On the domestic front, gold futures contract on the Multi Commodity Exchange (MCX) was up 0.8 per cent last week and has closed at ₹27,996 per 10 gm. The MCX-Silver futures contract closed at ₹36,970 per kg and was up 2 per cent.

The dollar index was pulled down on Friday due to weak US economic data release. The US Consumer Price Index was unchanged as against the market expectation of a 0.1 to 0.2 per cent increase in June. US retail sales also fell 0.2 per cent in June, raising concerns on economic growth. Both sets of data boosted hopes that the US Federal Reserve would not move aggressively in hiking interest rates.

The dollar index (95.11) was down 0.9 per cent last week and is hovering above a key support level of 95. Resistance is at 95.5. The support at 94.7 is likely to be tested this week. A break below it will see the index falling to 94 or even lower. Such a fall may limit the downside in gold and can take prices higher. On the other hand, if the dollar index manages to sustain above 94.7 and bounces higher, it can move up to test the resistance at 95.5 in the coming week.

US housing starts data and the European Central Bank (ECB) and the Bank of Japan meeting are the key events to watch this week.

The global spot gold ($1,228 per ounce) may struggle to extend the up-move in the coming week as a series of key resistances is ahead. Immediate hurdle is at $1,230. A break above it can take the prices higher to $1,235 and $1,240 which are the next significant resistances.

Gold has to surpass $1,240 decisively to minimise the downside pressure.

A downward reversal from any of the above mentioned resistances can drag the prices lower to $1,220 and $1,210 once again.

Also, as long as the yellow metal remains below $1,240, the possibility of prices falling to $1,200 and $1,190 cannot be ruled out.

On the domestic front, the MCX-Gold (₹27,996 per 10 gm) futures contract has a key resistance at ₹28,140. A strong break above it may ease the downside pressure and take the contract higher to ₹28,550 or even ₹28,700.

But a pull-back move from ₹28,140 may keep the contract under pressure. In such a scenario, the contract can fall to ₹27,600 and ₹27,400 in the coming days.

The global spot silver ($15.99) has resistance at $16.25 which can be tested initially this week. A break above this hurdle can take the prices higher to $16.7 or $16.9. But a downward reversal from the $16.25 resistance can take silver lower to $15.5 and $15.25 once again.

The MCX-Silver (₹36,970 per kg) futures contract has resistance at ₹37,250. A break above it can take the contract higher to ₹37,700 or even ₹38,000.

But a reversal from ₹38,000 can drag the contract lower to ₹37,000. In such a scenario, a range-bound move between ₹36,000 and ₹38,000 is possible for some time. On the other hand, if the silver contract fails to break above ₹37,250, it can fall to ₹36,000.

A further break above ₹36,000 will increase the likelihood of the contract falling to ₹35,000 or even ₹34,000.

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