Bullion Cues: Gold, silver could stay flat

Gold and silver fell in the early part of the week. But it recovered and ended with a minor loss. In the international spot market, gold ended at $ 1,925.2 an ounce, losing 1.7 per cent for the week. Silver underperformed the yellow metal as it lost 3.4 per cent last week to close at $ 24.64 per ounce. Similarly, on the Multi Commodity Exchange (MCX), gold June futures depreciated by 1.5 per cent to end the week at ₹ 51,606 (per 10 grams) and silver futures (May expiry) went down by 3 per cent to close at ₹ 66,733 ( per kg) last week.

That said, investors are continuing to take exposure to gold because of the geopolitical and inflationary risks. The WGC (World Gold Council) data shows that the global gold ETFs (Exchange Traded Funds) received an inflow of 257.2 tonnes for the year as on March 25, thus increasing the total holdings to 3,823 tonnes. But speculators have cut their longs marginally – the net longs on the COMEX stood at nearly 865 tonnes on March 29 as against 875 tonnes a week ago.

MCX-Gold (₹ 51,606)

The June futures of gold on the MCX declined in the initial part of the week and marked a fresh one-month low of ₹ 51,289 on Tuesday. Although it recovered and wrapped up the week higher at ₹ 50,775, it lost about 1.5 per cent for the week. Nevertheless, the price action does not indicate a trend and the contract has largely been charting a sideways trend ie, oscillating between ₹ 50,800 and ₹ 52,700.

Even though the major trend is bullish, the contract should either break ₹ 50,800 or ₹ 52,700 to assume the next price swing. A breakout of ₹ 52,700 can lift the contract to ₹ 54,000 and then possibly to ₹ 56,000. Whereas a break below ₹ 50,800 can drag the contract below the key ₹ 50,000 level, possibly to ₹ 48,850. Until then traders are recommended to stay on the sidelines. Our long recommendation at around ₹ 52,000 before a couple of weeks would have hit stop-loss at ₹ 51,400.

MCX-Silver (₹ 66,733)

Like gold futures, silver futures depreciated early last week and registered a fresh one-month low of ₹ 65,299 on Tuesday, before making a recovery and closing the week at ₹ 66,733. Even though silver appears a bit bearish when compared to flat trading gold, the May futures of silver remains above the important support band of ₹ 65,000-66,350. Until this level stays valid, the bullish inclination will remain.

However, the contract should see a daily close above ₹ 68,000 to increase the odds of seeing an upswing in price. Till then, one can stay away from initiating fresh positions. A close above ₹ 68,000 can lift the contract to ₹ 70,000 and then to ₹ 73,000 in the short-term. Alternatively, a breach of ₹ 65,000 can turn the trend bearish and the contract could drop to ₹ 63,000, a support level. Below this, the price range of ₹ 60,000-60,800 is a strong support band. Last week, our trade recommendation, given three weeks back, of going long at ₹ 69,000 would have hit stop-loss at ₹ 66,000.

Published on

April 02, 2022

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