Bullion prices are on a slide and continue hitting new lows. Spot prices of gold and silver in the international market depreciated by 3.8 and 2.8 per cent to close the week at $1,742.5 and $19.32 an ounce, respectively.
Similarly, the August futures of gold on the Multi Commodity Exchange (MCX) lost 2.2 per cent and September futures of silver on the MCX was down by 1.1 per cent as they ended the week at ₹50,779 (per 10 grams) and ₹57,131 (per kg), respectively.
Despite high inflationary environment, the price of the yellow metal continues to drop because of a strong US dollar. The dollar index formed a multi-year high of 107.79 last week weighing on the gold. As prices continue to decline, there is a drop in the net long position on the Comex. The net longs stood at about 455 tonnes on last Tuesday (July 5). This is the lowest since May 28, 2019. So, speculators seem to hold weak outlook on gold.
That said, the charts show that the price is currently at a crucial support. So, if there is a recovery, it should be from here. But if the supports are breached, we are in for a stretched downside ride.
The mid-week fall led to a weekly loss for gold futures on the MCX. Yet, from the current level, the contract has a support at ₹50,500 and a crucial one at ₹50,000. Similarly, on the upside, there is a hurdle at ₹51,300. So, the chart indicates a tight range of ₹50,500-51,300.
That said, if there is a move above ₹51,300 on the back of the support band of ₹50,500-50,000, it can touch 51,750 this week. Above that it could inch up to ₹52,250.
For gold futures to turn the trend bullish, it should breach the resistance at ₹52,250.
But, if the contract invalidates the support at ₹50,000, we will most likely witness a swift fall towards ₹49,350 which might extend even up to ₹48,500.
The silver futures dropped to mark an intra-week low of ₹56,100 last week before recovering to the current level of ₹57,131. Note that ₹56,100 is the lowest since the final week of September 2020, when it made a low of ₹56,020. So, the contract is testing a critical support. The 50 per cent Fibonacci retracement of the prior rally lies at ₹55,765, meaning the price region of ₹55,765-56,100 is a good support.
If there is a rally from here, the nearest hurdles are at ₹58,500 and ₹60,000. A rally above ₹60,000 this week is less likely.
On the other hand, if the contract breaches the support at ₹55,765, there could be a sharp fall to ₹50,000. But note that the 200-day moving average lies at ₹53,800, which can offer some support to the contract.