The rise in US treasury yields and the strong dollar weighed on bullion prices last week. However, inflationary concerns and geopolitical uncertainties have not receded and so, the downside might be limited for both gold and silver.
In the global spot market, gold fell by 2.3 per cent to end the week at $1,929.7 per ounce. However, silver depreciated 6 per cent, the biggest weekly decline since the final week of January this year, to close at $24.24 an ounce.
Similarly, on the Multi Commodity Exchange (MCX), gold futures dropped nearly 1.4 per cent and silver futures declined 3.6 per cent to end the week at ₹52,261 (per 10 grams) and ₹66,546 (per kg) respectively.
MCX-Gold (₹52,261)
The June futures of gold on the MCX, which broke out of the range of ₹50,800-52,700 in the week before last week, has fallen back into this range after seeing a decline over the past few trading sessions. Nevertheless, the price is above the key 50-day moving average (DMA), which is currently at ₹51,900, and the support at ₹50,800. Thus, the bullish inclination has not been invalidated. So, a rebound from either ₹51,900 or ₹50,800 is highly likely. Notably, a clear breach of the support at ₹50,800 can turn the short-term trend bearish.
We had suggested to go long on gold futures at around ₹52,990 and at ₹52,000 with stop-loss at ₹51,000. We suggest you to continue sticking to this plan. On the upside, when price rallies above ₹54,000 tighten the stop-loss to ₹52,500. Exit 50 per cent of the holdings at ₹55,000 and the remaining at ₹56,000. The contract could witness a price drop after rallying to ₹56,000.
MCX-Silver (₹66,546)
Silver futures saw a bigger fall than gold futures last week by losing 3.6 per cent. However, the May futures of silver remains above the important support band of ₹65,000-66,350. The 200-DMA also coincides within this range, making the support stronger. Therefore, the contract is not likely to slip below ₹65,000 and that leads us to the possibility of sideways movement if not a rally. But note that a breach of ₹65,000 can result in intense short-term sell-off, possibly dragging the contract to ₹63,000 and then to ₹60,000.
But as it stands, the support at ₹65,000 stays valid and a recovery is possible. Last week, we had recommended longs at around ₹68,375 with stop-loss at ₹66,400. Since the intraweek low was ₹66,103, stop-loss could have triggered. Nevertheless, on the back of the support band of ₹65,000-66,350, one can initiate fresh longs at current levels with stop-loss at ₹64,900. When the contract hits ₹70,000, book three-fourth of your longs and tighten the stop-loss to ₹68,000. Exit the remaining on a rally to ₹72,000.