The year 2018 has begun on a strong note for gold paving way for the yellow metal to breach the psychological level of $1,300/ounce.

This upward break has increased the bullish momentum. Globally, spot gold prices surged to a high of $1,344 and has come-off slightly from there.

On the domestic front, the gold futures contract on the Multi Commodity Exchange (MCX) shrugged off the strength in the rupee and moved in tandem with the global gold prices. The contract has surged in the past week breaking above a key resistance level of ₹29,350 per 10 gm and is currently trading at ₹29,790.

Dollar helps: Weakness in the US dollar is helping the bullion prices to remain on a strong footing. The US dollar index has tumbled breaking below the key support level of 92 and is hovering at 90.75 now. But as long as it remains below 91, the outlook will remain bearish, for a fall to 89.9 or even to 89.6 in coming days.

Whether the dollar index breaks further below 89.6 or not will be crucial in deciding the next trend.

Outlook: The pull-back after making a high of $1,344 on Monday keeps the chances alive for an interim dip in gold. However, the overall outlook remains bullish and any price dip in the coming days will increase the likelihood of fresh buyers coming into the market at lower levels.

Key supports are in the $1,320 and $1,325 band and then at $1,310 which are likely to limit the downside in the short-term. The outlook for gold will, however, turn negative only if the prices fall decisively below $1,300, which looks unlikely at the moment.

Resistance is at $1,343. As long as gold remains below this resistance, a range-bound move between $1,320 or $1,310 and $1,343 is possible for some time.

An eventual break above $1,343 will boost the momentum and will pave way for the target of $1,365 and $1,370.

On the domestic front, the MCX-gold (₹29,790 per 10 gm) futures contract can test ₹30,000 in the near-term. Inability to surpass ₹30,000 in the first attempt may trigger an intermediate pull-back move to ₹29,500 or ₹29,400. Further fall below ₹29,400 is unlikely.

As such an eventual break above ₹30,000 will increase the likelihood of the contract targeting ₹31,000 over the medium-term.

Traders with a medium-term perspective can go long at current levels and also accumulate on dips at ₹29,600. Keep the stop-loss at ₹29,200 for the target of ₹30,900. Revise the stop-loss higher to ₹30,100 as soon as the contract moves up to ₹30,250.

Note: The recommendations are based on technical analysis and there is a risk of loss in trading.

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