Bullion was bullish last week despite the dollar and the Treasury yields rising. The precious metals went up on the back of the inflationary concerns and the persisting uncertainty because of the Russia-Ukraine conflict.
Investors seem to be adding gold in their portfolios as the inflows keep coming into the global gold ETFs (Exchange Traded Funds). For the week ended April 8, the net inflows were 11.2 tonnes, taking the total holding to 3,846.5 tonnes.
In the international spot market, gold and silver appreciated by 1.4 and 3.6 per cent and ended the week at $1,973.5 and $25.63 per ounce, respectively. Similarly, on the Multi Commodity Exchange (MCX), both the precious metals went up. Gold futures (June expiry) rallied 1.8 per cent to end at ₹52,992 (per 10 grams) and silver futures (May expiry) was up 3 per cent and closed at ₹69,032 (per kg).
MCX-Gold (₹52,992)
The June futures of gold on the MCX was positive for most part of the week and ended up breaching the resistance at ₹52,700. Therefore, the contract has moved out of the ₹50,800-52,700 range and is likely to extend the rally this week. The nearest hurdle is at ₹54,000 above which lies the key resistance of ₹56,000. On the downside, the supports at ₹52,700 and ₹51,400 can offer protection for the bulls.
Traders can consider buying MCX gold futures at the current levels and accumulate more if price declines to ₹52,000. Place initial stop-loss at ₹51,000. 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 (₹69,032)
The May silver futures rallied last week along with gold futures and closed above ₹69,000. Thus, a close above ₹68,000, which we have been mentioning as a prerequisite to turn our view bullish, has happened. So, although the contract has a barrier at ₹70,000, it can be expected to ease past this level because it can gain from the precious metals tag like gold. It could touch ₹73,000 in a couple of months. But there might be a corrective decline to ₹67,750 before breaking out of the ₹70,000-mark.
So, traders can go long now i.e. at around ₹69,000 and add more longs when price softens to ₹67,750. Keep stop-loss at ₹66,400. Revise it up to ₹68,200 when the contract moves above ₹70,000. Liquidate half of your longs at ₹72,000 and exit the remaining when price rallies to ₹73,000 from where there could be a price correction.