The news of a new coronavirus strain, feared to be more contagious, spooked investors and, therefore, the markets witnessed a volatile session last week. Equities saw a massive sell-off on Monday. Bullion bulls who feed on such concerns lifted the price of gold and silver.

Consequently, on the Multi Commodity Exchange (MCX), the spot price of gold hit one-month high of ₹50,420 (per 10 grams) and silver registered a three-month high of ₹68,624 (per 1 kg) during last week. However, as the week progressed, the uptrend was unable to pick up momentum, resulting in gold and silver ending the week flat at ₹49,787 and ₹66,223, respectively.

In dollar terms, gold wrapped up the week with a marginal gain at $1,883.4 versus the preceding week’s close of $1,880.6. Similarly, silver closed a bit higher at $25.82 against previous week’s close of $25.76.

On Thursday came the announcement about the Brexit. Tight negotiations came to an end as London and Brussels finally agreed to a deal. While complete details of the deal are yet to be known, the authorities seem to have found the common ground and as the transition period comes to end this month, the UK will be officially out of the European bloc from January 1, 2021.

While the uncertainty in Brexit is now behind us, which can weigh on the prices of bullion, the dollar continues to stay weak which can be a buoyant force, keeping a check on downside.

MCX-Gold (₹50,073)

The February expiry futures contract of gold on MCX that closed by forming a higher high in the third week of December opened the week on the front foot following the new Covid scare. It began Monday’s session at ₹50,416 and then rallied to register a high of ₹51,009.

The contract looked like breaking past the ₹51,000-mark, where 38.2 per cent of the retracement level of the prior downtrend, coincides. This would have given a big boost to the uptrend. Instead, the bulls lost the plot and what happened was the contract entering a consolidation phase, ending the week on a flat note. The price managed to stay above the support band of ₹49,700 and ₹50,000.

The prevailing price action points to a possible short-term sideways trend wherein the contract might be fluctuating within ₹49,700 and ₹51,000. The course of the next swing in price depends on the direction of the break of this trading range. Nevertheless, indicators like the relative strength index (RSI) and the moving average convergence divergence (MACD) on the daily chart continue to exhibit bullish bias. Also, the price is trading well above the 200-day moving average (DMA).

The bulls still appear to be in control of the major trend and despite the intermittent fluctuations, the price can be expected to rise over the next couple of years with the upward targets being ₹60,000 and ₹65,000.

MCX-Silver (₹67,509)

Silver futures, like gold futures, rallied initially last week . However, after recording a three-month high at ₹71,650, the March futures contract of silver gave up the gains and saw a muted close for the week. Even though the price poked above the important hurdles of ₹70,000 and ₹71,000 briefly, the contract saw the week ending below ₹70,000. At the same time, by ending the week at ₹67,509 it remains above the key support of ₹66,000. This price point is also the neck level of the double-bottom chart pattern formed on the daily chart adding to its significance.

Going forward, silver futures might tread along a horizontal path, similar to the yellow metal. Here, the boundaries of the range can possibly be ₹66,000 and ₹71,000; but this is the short-term projection. Over time, the price can appreciate and the double-bottom pattern, which still holds valid, indicates the possibility of a rally towards ₹74,000.

Considering the potential for the next two years, the uptrend can add more strength. The price has the potential to surpass the prior high at around ₹80,000 and can touch ₹85,000.