Commodity Analysis

Uptrend in gold gains momentum

Gurumurthy K | Updated on December 30, 2018 Published on December 30, 2018

Gold extended its rally for the second consecutive week. The global spot gold prices surged 1.7 per cent and closed at $1,278 per ounce.

Silver, on the other hand, broke its prolonged sideways consolidation between $14 and $15 per ounce. The global spot silver prices surged, breaking above $15, in the past week, and closed on a strong note. Silver skyrocketed 5 per cent to close the week at $15.38 per ounce.

A subdued US dollar index helped gold and silver prices gain strength last week. The dollar index fell within its sideways range and closed the week at 96.4, down 0.6 per cent for the week. Though the dollar index is retaining its broad 96-97.7 sideways range, the price action on the daily chart leaves the bias negative.

The index looks vulnerable to decline below 96 in the coming weeks. In such a scenario, the dollar index can fall to 95 or 94.8, which in turn may push gold and silver prices further high.

On the domestic front, the gold futures contract on the Multi Commodity Exchange (MCX) snapped its two-week fall.

The contract surged in tandem with the global spot price and closed 1.3 per cent higher at ₹31,598 per 10 gm. The MCX-Silver contract rallied 3.9 per cent last week. The contract closed at ₹38,706 per kg.

Gold outlook

The global spot gold ($1,278 per ounce) rose, breaking above the key resistance level of $1,275. As long as the yellow metal trades above $1,275, an upmove to $1,285 or $1,290 is likely in the near term.

A further break above $1,290 will then pave the way for the next targets of $1,300 and $1,305.

The downside is expected to be limited even if gold declines below $1,275. The key supports at $1.267 and $1,255 are likely to restrict the downside in the short term.

The MCX-Gold (₹31,598 per 10 gm) has a key near-term support at ₹31,500. The downside is likely to be limited to ₹31,350 even if it declines below ₹31,500 in the coming days. The bias is bullish. A rally to ₹32,000 and ₹32,200 is likely in the coming weeks.

Silver outlook

The strong surge last week ended the prolonged sideways consolidation movement between $14 and $15 per ounce. The global spot silver ($15.38 per ounce) had been stuck inside this range since August. The region between $15 and $14.9 will now act as a strong support.

Dips to this support zone is likely to find fresh buyers coming into the market. An upmove to $15.6 and $15.7 is likely in the near term. A strong break above $15.7 will then increase the likelihood of the prices extending its upmove to $16 and $16.15 thereafter.

The MCX-Silver (₹38,706 per kg) is also gaining strength. The immediate support is at ₹38,500. Though there is resistance at ₹39,000 and ₹39,200, the contract is likely to breach these hurdles in the coming days. A strong break above ₹39,200 will pave way for the next target of ₹40,000. It will also increase the possibility of the contract targeting ₹41,000 or even higher levels over the medium term.

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Published on December 30, 2018
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