Bullion Cues: Will gold and silver break their range?

Investors are not lured to gold despite elevated inflation and a lot of uncertainties. The latest WGC (World Gold Council) confirms the same as global gold ETFs (Exchange Traded Funds) have seen net outflows for the third straight month in July. It stood at 81 tonnes last month. Speculators too seem to have lost interest as the net long positions on the COMEX dropped to the lowest since April 2019 as it stood at 284 tonnes as on August 1. This indicates that the picture is not so rosy for the yellow metal, at least in the near term.

That said, gold rallied last week in the international spot market and closed at $1,774 per ounce, gaining half a percent. Similarly, gold futures on the Multi Commodity Exchange (MCX) was up 0.5 per cent as it ended Friday’s session at ₹51,874 (per 10 grams).

On the other hand, silver underperformed relatively. The price of global spot silver was 2.2 per cent down last week as it closed at $19.88 per ounce. Silver futures on the MCX lost 1.7 per cent last week as it ended at ₹57,364 (per kg).

While gold is expected to stay flat for some more time, silver might resume the downward trend from the current level according to the chart.

MCX-Gold (₹51,874)

Even though MCX gold futures rallied last week, it has not moved out of the range of ₹50,000-52,600. Until the contract continues to trade within this range, the next swing in price will remain uncertain.

If gold futures can extend last week’s rally and cross over the resistance at ₹52,600, it can turn the outlook positive. While the nearest hurdle is ₹54,000, once the contract gathers enough momentum to rise past ₹52,600, it can be expected to appreciate to ₹55,000 quickly.

However, if the contract declines from here and breaches the support at ₹50,000, it can swiftly move down to ₹47,700 – its closest support. A breakdown below this level can drag the contract to ₹46,000.

Lacklustre Silver

Resistance band – ₹58,500-60,000

There is a high probability of silver futures falling from the current level

Support band – ₹54,250-55,000

MCX Silver (₹57,364)

As the silver futures on the MCX faced resistance at ₹58,500, it could not extend the rally from the previous week. Also, ₹60,000 is a strong barrier making the price region of ₹58,500-60,000 a resistance band. A falling trendline and the 50-day moving average coincide within this band, making it a substantial barrier for the bulls.

So, the likelihood of silver futures falling from the current level looks high. While ₹57,000 can be a minor support, the price could drop to the support band of ₹54,250-55,000. A breach of this level can lead to another downswing to ₹52,000.

On the other hand, if the contract breaks out of ₹60,000 it can move up to ₹63,500 easily. The rally might even extend to ₹65,000.

Published on

August 06, 2022

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