Gold and silver weakened in the initial part of the week on indication from the US Federal Reserve that it might wind down its bond buying programme soon. But there was a recovery thereafter on positive set of data from China helping them close positively for the week.

China’s industrial output jumped 9.7 per cent in July. Also, the country’s imports and exports grew at a faster than expected pace. This news plus the weakening greenback led bullion prices higher. Gold closed the week at $1,312 an ounce and silver ended at $20.54/ounce, up three per cent.

However, investment sentiments continued to be weak and SPDR Gold Trust — the world’s largest gold backed ETF — saw holdings drop by seven tonnes to 911 tonnes in the week.

In the domestic bullion market a lot of things have changed since our review a fortnight back. The National Spot Exchange (NSEL) which initially suspended its one day forward contracts, shut trading in e-series contracts too. The regulatory overhang in NSEL drove traders off the futures platform of MCX too. MCX and National Spot Exchange have the same parent — Financial Technologies. Daily average volumes in gold futures contracts in MCX dropped to 1.29 lakh last week, down 35 per cent from the average daily volumes recorded in June. MCX gold remained weak during the week and settled down at Rs 27,900/10 gram, down two per cent. MCX silver ended at Rs 42,476/kilogram, up one per cent. The rupee’s fall to a record low against the greenback at 61.8, didn’t help much.

e-series units

The National Spot Exchange has suspended trading in e-series contracts only temporarily. But, we suggest that investors holding e-units take physical delivery. One, the exchange is in a tiff with the regulator and doubts persist over the exchange’s operation in future. Two, even if trading resumes you may not get to exit at the market price as paltry volumes will skew contract prices.

To take physical delivery you need to sign and send the surrender request form and delivery instruction slip to the depository participant (NSDL or CDSL here) who holds your demat units. You can ask your broker for these forms.

The DP’s acknowledgment slip has to be then sent to the exchange. By this time your holdings would have already been transferred to the exchange’s beneficiary account.

As you make payment for the delivery and other charges , you will have physical units of your metal in the warehouse. You can then take delivery. At the time of delivery, the exchange will ask you to pay for making charges (conversion of e-gold units into coins of 1 gram will cost Rs 100/gram) .

Cues for next week

The yellow metal may build on to the gains made last week and inch up further. However, any data from the US suggesting strengthening of the economy may turn negative for the metal. Traders will be eyeing data on US jobless claims on Thursday. Analysts expect jobless claims to fall from 3.33 lakh last week to around 3.28 lakh in the coming week. Domestic wholesale and retail inflation figures and manufacturing data are also expected during the week.

Levels for traders

MCX gold futures is in a short-term up trend. If volumes support, price could cut past the Rs 29,000 mark again in the coming week. The first resistance would be at Rs 29,400 and the next at Rs 30,000. Else, the metal will trade in the range of Rs 27,400-29,000. If it breaks below Rs 27,400, it will find support at the 50-day moving average at Rs 27,058.

In the chart of MCX silver futures, the price channel is sloping up signalling an uptrend. If the trend continues, the price will hit Rs 43,700 and Rs 43,900. Should the price decline, the first stop will be at Rs 40,785 and the next at Rs 39,155.

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