The MCX-gold contract rose sharply by 3.7 per cent, breaching the psychological ₹28,000/kg level and recorded a high of ₹28,589 on Thursday. The contract has given back some of its gains and is now hovering around ₹28,100 levels.
Significant supports for the contract are available at ₹28,000 and then at ₹27,800. A sharp 1000 rupee rally on a single day last Thursday has reversed the bearish short-term view on the contract. The above mentioned supports could restrict the downside for the contract in the coming week. Traders with a short-term perspective can go long in declines at ₹28,000. If the contract declines below this level, accumulate more longs at ₹27,850. Stop-loss can be kept at ₹27,650 for the target of ₹28,550.
Medium-term view: Last week’s sharp rally has turned the medium-term view also bullish. There is a complex inverted head and shoulder pattern visible on the daily candle stick chart. A rally to ₹30,300 – which is the target level of this pattern – looks likely in the medium-term. The neckline support of this pattern is placed at ₹27,500. The outlook will turn bearish only if the contract declines below this support level.
(Note: The recommendations are based on technical analysis. There is a risk of loss in trading.)