Precious metals fell last week as a strengthening dollar put pressure on global prices. Gold dropped 4.6 per cent to $3,884.70 an ounce, while silver lost 5.8 per cent. Domestic gold futures settled at ₹1,36,705, and silver futures closed at ₹1,76,309. Bears currently hold sway as prices face further potential losses.
Precious metals came under pressure last week, largely due to a strengthening dollar. Notably, the dollar index hit a 19-month high of 103.44 before settling at 103.41.
Gold ($3,884.70/ounce) and silver ($48.70/ounce) lost 4.6 per cent and 5.8 per cent respectively. However, both metals have key support levels ahead, while the dollar index is approaching a potential resistance. This could trigger a short-term recovery in precious metals, although prices may decline further before rebounding.
In the domestic market, gold futures (₹1,36,705/10 gram) shed 3.8 per cent, while silver futures (₹1,76,309/kg) declined 4.6 per cent.
MCX-Gold (₹1,36,705)
Gold (Dec) futures breached the support at ₹1,38,000 and marked a fresh low of ₹1,35,530 on Friday before recovering marginally to close at ₹1,36,705.
The price action indicates a strong downtrend, with no signs of a reversal on the chart. Moreover, gold in dollar terms has some more room to decline before reaching key support levels.
Consequently, gold futures in the domestic market are likely to extend the decline, potentially to ₹1,35,000 or even to ₹1,33,500.
On the other hand, a recovery from the current level will face resistance at ₹1,41,000 and ₹1,43,600. Only a decisive breakout above the latter can turn the outlook positive.
Overall, we expect gold futures to extend the decline from the current level before rebounding from the ₹1,33,500-1,35,000 support zone. However, any recovery is likely to face considerable selling pressure at the aforementioned resistance levels.
MCX-Silver (₹1,76,309)
Silver (Dec) futures declined from the resistance at ₹1,90,000 last week. Although the contract underperformed gold futures, it managed to stay above the previous low of ₹1,75,251.
However, the trend remains weak and the likelihood of the support at ₹1,75,000 being breached is high. Such a move can drag the contract to the ₹1,67,700-1,70,000 price band, a potential support zone.
The prospect of a further decline in international silver prices increases the likelihood of silver futures witnessing more losses before staging a recovery.
While a rebound from the above-mentioned support zone is possible, it is unlikely to result in an immediate bullish trend reversal.
For the outlook to turn bullish, silver futures should surpass the barrier at ₹2,00,000. Until then, the bears will retain the upper hand.