For most part of last week, the bullion prices dropped as the US treasury yields were on a rise. However, on Friday, especially in the second half of the session, the dollar saw a sharp drop which aided gold to rally. Silver, which was largely flat for the week, also benefited and it outperformed the yellow metal last week.
The spot gold and silver in the international market recorded gains last week . They were up by 0.9 and 6.3 per cent and have closed the week at $1,656.7 and $19.4 per ounce, respectively.
Similarly, in the domestic market, gold and silver futures ended the week in green. The nearest expiry gold and silver futures on the Multi Commodity Exchange (MCX) appreciated 0.7 and 4.3 per cent as they ended at ₹50,626 (per 10 gram) and ₹57,613 (per kg) respectively.
Technically, gold and silver contracts on the MCX have been exhibiting bearish bias. However, they are above some key supports that have been helping them of late.
MCX-Gold (₹50,626)
The December futures of gold marked an intra-week low of ₹49,808 on Friday before seeing a recovery to close at ₹50,626. The sharp rally towards the end of the week gives some positivity and the contract has formed a hammer candlestick pattern on the weekly chart. This hints for a possible rally from here.
That said, breaking out of ₹52,000 can be a difficult task since this is a strong resistance where a falling trendline coincides. Subsequently, ₹52,800 and ₹54,000 are the notable barriers. On the other hand, ₹50,000 is a strong base and this is less likely to be breached this week. Support below this level is the price band of ₹49,000-49,250.
Trade strategy: Since we expect gold futures to rally to ₹52,000 from the current level, we suggest taking long positions. But consider the risk-reward, rather than buying now, one can initiate longs when price dips to ₹50,300 and place stop-loss at ₹49,700. Book profits at ₹52,000.
MCX-Silver (₹57,613)
The price action through the week shows that silver futures performed better than gold. There were good short build-ups between October 7 and 14 on the back of which we had expected the prices to fall further. But, on the contrary, the December futures of silver was largely stable through the week and produced a good rally on Friday to end at ₹57,613.
However, for the contract to turn the trend bullish, it should decisively breach the resistance at ₹62,000. Nevertheless, given that ₹55,000 has been holding well and that silver futures bounced off this level, we forecast the upward run to continue at least till ₹62,000. Therefore, traders can implement long trades.
Trade strategy: Go long on December silver futures when price dips to ₹56,800 for better risk-reward ratio. Keep initial stop-loss at ₹54,200. When the contract touches ₹60,000, tighten the stop-loss to ₹58,800. Exit when the price rises to ₹61,800.