Gold produced a marginal gain last week as the dollar retreated from the high. However, silver continues to struggle and saw a marginal drop. In the international spot market, gold was up 1.2 per cent last week, as it closed at $1,727.6 an ounce on Friday. Silver, on the other hand, lost 0.5 per cent to end the week at $18.59 an ounce.
Similarly, in the domestic market — on the Multi Commodity Exchange (MCX), gold futures appreciated 1.1 per cent to end the week at ₹50,644 (per 10 gram). But silver futures posted a loss of 0.8 per cent as it wrapped up the week at ₹55,131 (per kg).
Fundamentally, there seems to be no push for the bullion. Looking at the latest World Gold Council (WGC) data, demand from India, one of the largest consumers of the yellow metal, saw muted retail demand in June as the wedding season ended. Thus, the imports in June, at about 44 tonnes, were 55 per cent lower month-on-month. According to WGC, demand remained subdued in July so far because of soft rural demand and gold Exchange-Traded Funds (ETFs) in India witnessed net outflow of 0.6 tonnes in the first two weeks of July.
Technically too, the charts do not seem to be promising, as there are no signs of a bullish reversal.
Since early May, the gold futures on the MCX (August expiry) has been tracing a sideways trend — it has been oscillating between ₹50,000 and ₹52,000. So, until either of these levels are breached, the next leg of trend will remain uncertain.
But note that the contract rebounded from ₹50,000 last week, where the 200-day moving average coincides. Also, there is a rising trendline which could offer support at around ₹49,500, making the price area of ₹49,500-50,000 a good support band.
Therefore, in the coming week, we can expect gold futures to inch up. If it gathers enough momentum to breach the hurdle at ₹52,000, we can expect a rally to ₹54,000 within a couple of weeks. On the other hand, if it slips below ₹49,500, it can drop to ₹47,700, the nearest support.
The silver futures (September expiry), which has been on a downtrend since the past three months, is currently testing a support at ₹55,000. If the contract rebounds from this support and rallies, it can find resistance at ₹58,500 and at ₹60,000. Essentially, the price area of ₹58,500-60,000 is a considerable resistance band and a rally beyond these levels is less likely. Resistance above ₹60,000 can be spotted at ₹63,000.
But if the contract falls below ₹55,000, it can see a swift drop towards the support at ₹52,000. A break down below this can drag the contract to ₹50,000. This is critical support, from where the contract will most likely see a bounce.
July 23, 2022