Bullion Cues: Precious Metals Can Drift Lower

Gold and silver had a contrasting week. The former depreciated, whereas the latter gained. In terms of dollars, gold lost 1.2 per cent whereas silver went up 0.4 per cent to end at $1,889 and $22.8 per ounce, respectively.

On the Multi Commodity Exchange (MCX), gold futures was down 0.9 per cent as it closed the week at ₹58,375 per 10 gram. Silver futures appreciated 0.4 per cent to end at ₹70,235 per kg.

MCX-Gold (₹58,375)

Gold futures (October series) fell last week and closed below the 200-day moving average (DMA). This has strengthened the bears and the likelihood to see more fall is high.

That said, there is a chance for the contract to see a minor rally from here, possibly to ₹59,000, before falling further. We anticipate the downtrend to extend below ₹58,000 where gold futures could touch ₹57,000.

Trade strategy: Initiate fresh short position on gold futures now at around ₹58,375 and add shorts in case the price rises to ₹59,000. Place stop-loss at ₹59,500.

When the contract slips below ₹58,000, tighten the stop-loss to ₹58,600. Further tighten the stop-loss to ₹58,000 when gold futures touch ₹57,500. Exit at ₹57,200.

MCX-Silver (₹70,235)

Silver futures (September contract) saw a limited decline as it has a support between ₹69,500 and ₹70,000. That said, the contract did not rally and was moving sideways.

The broader bearish bias still exists and only a breakout of ₹72,500 will turn the trend bullish. We expect the contract to see a minor rally to ₹71,800 and then resume the downtrend.

In such a case, silver futures is likely to slip below ₹69,500 and move down to ₹65,000.

Trade strategy: Given the above conditions, traders can stay away for now. Sell ​​silver futures with a stop-loss at ₹73,000 if the price rallies to ₹71,800. Book profits at ₹69,500.

If the contract breaks below ₹69,500, either from the current level or after a rally to ₹71,800, go short afresh. Target and stop-loss can be at ₹65,000 and ₹71,800 respectively.

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