Safe haven demand pushed up bullion prices early last week. But later both gold and silver gave up the gains and ended the week on a flat note. In the international market, spot gold and silver ended the week at $1,985.3 (up 0.9 per cent) and $25.8 (up 0.8 per cent) an ounce, respectively. At the Multi Commodity Exchange, gold futures closed at ₹52,878 (per 10 grams) as against last week’s close at ₹52,559, while silver futures ended the week at ₹70,370 (per 10 grams), as against last week’s close. It was close to ₹69,160.
Nevertheless, the fundamentals of gold continue to improve. Global gold ETF (exchange traded fund) inflows were positive in February (35.3 tonnes), according to the latest data from the World Gold Council (WGC). Therefore, the inflow for the year till February 28 has come down to around 82 tonnes. The North American region remained the largest contributor with 70 tonnes inflow. The speculators also seemed sharp. The net long position on COMEX stood at 999 tonnes as on March 8, 2022, the highest since March 10, 2020.
MCX-Gold (₹52,878)
Gold April futures on MCX halted and hit a high of Rs 55,558 last Tuesday and ended the week at Rs 52,559. In this way, it gained 0.6 percent. Although the trend remains bullish, the price action on the weekly chart, especially the inverted hammer candlestick, requires caution. That is, there could be a corrective downside move towards the nearest support at ₹51,800. The latter supports are at ₹51,000 and ₹50,000. A breach of ₹50,000 could turn the near term trend into bearish. On the other hand, the contract may find it difficult to breakout of ₹56,000 in the short term.
We have been working on long positions for almost a month. The target and stop-loss levels are ₹56,000 and ₹49,500. One can increase the stop-loss up to ₹51,400. The contract failed to meet the target as it made a high of Rs 55,558. We recommend going long by this but changing the target to ₹55,000 to adjust as per the recent high. For new positions, traders can look forward to more clarity in price action.
MCX-Silver (₹70,370)
Like gold futures, silver futures (May series) climbed higher in the first half of the week and touched a nine-month high of 73,078 on Tuesday. But then at the end of the week it saw a significant drop to ₹70,370. It posted a weekly gain of 1.8 per cent. The contract has formed an inverted hammer candlestick on the weekly chart. This indicates a possible corrective downside, even though the overall bias remains bullish. There is an important support band forming within ₹66,350 and ₹67,500. In the coming week, a break below ₹66,350 is less likely and hence a breakout of ₹73,000.
As per our suggested strategy last week, there would be someone in a long position initiated at around ₹69,000. The stop-loss was at ₹64,700 and the target was ₹76,000. While traders can retain the same target, limit the stop-loss to ₹66,000. Because a breach of this level can turn the short-term trend negative.
Published on
12 March 2022