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Bullion Cues: Bearish Outlook Continues

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Gold, in terms of dollars, witnessed a marginal drop of 0.1 per cent and closed at $1,919.6 per ounce and gold futures on the Multi Commodity Exchange (MCX) was down 0.2 per cent by ending at ₹58,211 per 10 gram.

Silver, in dollar terms, was up 1.8 per cent and MCX silver futures gained 1.3 per cent as they wrapped up the week at $22.8 per ounce and ₹70,030 per kg, respectively. Thus, gold was largely flat last week, whereas silver posted a gain.

That said, the overall bias remains bearish for both precious metals.

MCX-Gold (₹58,211)

Gold futures (August series) declined to mark an intra-week low of ₹57,651 before recovering on Friday to close at ₹58,211. If there is a rally from here, it is likely to be capped at ₹59,000.

Eventually, gold futures is expected to fall, either from the current level or after a rally to ₹59,000. The nearest support is at ₹56,960. Yet, the contract will most probably fall to ₹55,800 in the coming weeks.

Trade strategy: Retain the short trade initiated on gold futures at ₹58,300 last week. Add more shorts if the price moves up to ₹58,900. Place initial stop-loss at ₹59,600.

When the contract slips below ₹57,500, tighten the stop-loss to ₹58,200. On a fall to ₹56,800, exit half of the short positions and tighten the stop-loss to ₹57,600. Liquidate the balance half at ₹55,800.

MCX-Silver (₹70,030)

Silver futures (September contract), after beginning last week with a gap-up, largely stayed flat. Even though the contract has closed above ₹70,000, the breakout does not appear strong enough to consider it as a bullish reversal.

For silver futures to turn the trend bullish, it should pass through the barrier between ₹71,000 and ₹71,300. As it stands, the chances for a fall is high and the price action hints at a fall to ₹65,000 in the short term.

Trade strategy: Hold the short position taken at ₹69,100. Sell more if the price rallies to ₹71,000. Keep initial stop-loss at ₹73,000. When the price falls below ₹67,500, modify the stop-loss to ₹70,000. Book profits at ₹65,000.





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