The US BEA’s (Bureau of Economic Analysis) latest inflation figures show that the rising trend continues. The PCE (Personal Consumption Expenditure) in November hardened by 5.7 per cent year-on-year (y-o-y). It is also higher sequentially as it stood at 5.1 per cent in October. The core PCE, excluding food and energy, stood at 4.7 per cent y-o-y. It was at 4.2 per cent October. Following the release, bullion prices saw a sharp decline initially as the dollar firmed. However, both gold and silver swiftly recovered.

There was not much action post this and on a weekly basis, both the precious metals posted gain in the international spot market. Gold ended at $1,808.1 per ounce, posting a weekly gain of 0.6 per cent whereas silver, which closed at $22.94, appreciated by about 2.7 per cent.

In the domestic markets, both gold and silver underperformed as the rupee strengthened in the past week against the dollar. Gold futures (February expiry) lost nearly 1 per cent as it closed at ₹48,119 (per 10 grams) versus the previous week’s close of ₹48,594. On the other hand, silver ended flat at ₹62,298 (per Kg) as against the previous week’s close of ₹62,137.

Because of the lack of momentum since the beginning of this month, speculators seem to be cutting back longs in gold. As per the latest data by the Commodity Futures Trading Commission (CFTC), the net long positions on the COMEX stood at 657 tonnes as on 20th December 20 compared to 881 tonnes in mid-November. Therefore, a drop in interest for the yellow metal can be observed.

MCX-Gold (₹48,119)

The February futures of gold on the MCX, which witnessed a breakout of the resistance at ₹48,550, could not produce a follow through rally. In fact, the futures were down for the week. Notably, major portion of that down-move happened in the first half of the week whereas during the second half, it was largely consolidating. Nevertheless, the contract has fallen back into the range of ₹47,400 - ₹48,550 within which it has been fluctuating in the past one month.

Technical indicators like the relative strength index (RSI) and the moving average convergence divergence (MACD) on the daily chart are hovering in the neutral region. Thus, as it stands, there is a clear lack of trend.

Last week, following the breakout, we had recommended to go long at around ₹48,600 with stop-loss at ₹47,600. While the position is at a loss, traders can continue to hold the positions. However, revise the stop-loss to ₹47,250 i.e., below the bottom limit of the above-mentioned range. Exit the longs at ₹50,000.

But traders considering fresh trades can wait for now as the price is expected to be stable as we approach the year-end. So, for new positions, one can wait for one more week or so and we can take decisions based on how the price action pans out going forward.

In case if the contract regains positive momentum and moves above ₹48,550, it can appreciate to the immediate resistance at ₹50,000 in the near-term. Subsequent resistance is at ₹52,500. But if the contract breaks below ₹47,400, the short-term can turn bearish wherein the price could drop to ₹46,500 and could even decline to ₹45,920.

MCX-Silver (₹62,298)

Even though silver futures (March expiry) began the week on the back foot, it did not fall like gold futures. The contract recovered quickly after marking an intraweek low of ₹61,182.

However, after covering up the loss, it did not appreciate much as it faced stiff resistance at ₹62,500 all through the week.

Notably, the contract continues to test ₹62,500 and is not declining showing some buying interest. Moreover, the daily MACD is hinting some positivity. However, unless this level is decisively breached, we cannot assume an uptrend.

A breakout of ₹62,500 can swiftly lift the contract to ₹64,000 – its 50-day moving average. As the breach of ₹62,500 can turn the short-term trend positive, the futures can even rise to ₹66,250. So, like we recommended last week, one can wait until the hurdle at ₹62,500 is taken out. Execute fresh long positions once the contract moves past ₹62,500 as this will turn the near-term outlook positive. Initial stop-loss can be at ₹60,500. When the contract rallies above ₹64,100, revise the stop-loss to ₹62,400. Liquidate the longs at ₹66,250.

In case if the contract fails to breakout and declines from here, key supports can be spotted at ₹60,000 and ₹57,800. A break below ₹57,800 could turn the medium-term trend negative.

Gold silver ratio

Gold silver ratio currently stays near 78. The chart of this ratio shows that 78 to 80 is a resistance band and therefore, it may see a drop. A drop in the ratio will occur if silver outperforms gold and thus, silver seem to be better positioned to rally when compared to gold. So, bullion traders can allocate funds accordingly.

However, keep in the mind the levels and recommendations for MCX-gold and MCX-silver discussed above and trade accordingly.

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