Gold prices had mild profit-taking on Tuesday after setting a more than three-month high, and a stronger US dollar also held back the precious metal. Investors in the near term still have a positive outlook on gold, and the medium term is still positive.
For traders in the domestic futures market, the key level to watch is around Rs 1.66 lakh per 10 grams. According to technical levels highlighted by Kotak Securities, MCX Gold October futures have multiple resistance zones above the current market price, with Rs 1,66,964 emerging as an important upside level.
Spot gold declined 0.25% to $4,639.56 per ounce and spot silver slipped 0.44% to around $68.50 per ounce at 10:33 pm IST on August 25. In the domestic market, MCX Gold October futures fell 0.18% to Rs 1,62,900 per 10 grams. MCX Silver September futures also declined 0.16% to Rs 2,43,829 per kg.
Gold Outlook Remains Bullish
Kotak Securities said gold's underlying support is still strong despite some short-term volatility. Bullion prices were supported by the continuing concerns about currency and debt debasement and continued doubts about currency and debt crises.
Also important has been strong investment demand. Gold-backed exchange-traded funds drew 46.7 metric tonnes last week, the biggest weekly inflow in about 10 months. Such flows indicate continued investor interest in gold as a store of value and a hedge against financial and macroeconomic uncertainty.
But the near-term outlook is not without risks. A stronger US dollar and changing expectations about Federal Reserve interest rate policy could limit further gains. Markets are currently pricing in a 42% chance of a rate hike in September, making the US economic data of gold and other metals much more important for bullion traders.
Investors will focus on US PCE inflation data and Federal Reserve Chair Kevin Warsh’s speech at Jackson Hole for future direction for monetary policy. Any indication of tighter monetary conditions could put pressure on gold, while signs of easing expectations may provide another leg higher.
Geopolitical developments could also affect bullion prices. Escalating tension between Iran and the US has added another layer of uncertainty to global markets, potentially supporting demand for safe-haven assets and thus, perhaps supporting gold prices.
Kotak Securities expects the fundamental outlook for gold to be bullish over the medium term and, as always, near-term volatility and profit-taking risks remain elevated.
MCX Gold Support and Resistance Levels
As for traders tracking MCX Gold October futures, the immediate support zone is at Rs 1,62,271. A break below this level could take the contract to the next support at Rs 1,61,643.
Further weakness could bring the third support level of Rs 1,59,610 into focus. Such levels may become important if profit-taking accelerates or global gold prices come under pressure from a stronger dollar.
On the upside, first resistance is seen at Rs 1,64,303 followed by Rs 1,64,931. A gain above these levels could further help strengthen the bullish trend and could even push MCX Gold October futures to the major resistance at Rs 1,66,964.
So, Rs 1.66 lakh is a critical psychological and technical zone for traders. A sustained breakout above this point could lead to further upside, although for the short term, we need to watch global cues and volatility to take a position.
Key Spot Gold Levels
Kotak Securities expects spot gold to find support at $4,605. A break below this level will push prices to the next support at $4,580.90 and a wider dip to $4,502.80.
On the upside, resistance is set at $4,683 followed by $4,707.10. The next major resistance is at $4,785.10.
These levels will be particularly important because movements in international gold prices directly influence domestic MCX contracts through both global bullion prices and currency movements.
Silver Trading Strategy
Silver also stayed under pressure on Tuesday, while the long-term direction will be the result of the precious-metals trend, the dollar, and US interest rate expectations.
Kotak Securities has placed $67.86 as the first support for spot silver, followed by $67.26 and $65.32. On the upside, resistance is at $69.80, $70.40, and $72.34.
For MCX Silver, the first support is at Rs 2,43,414, followed by Rs 2,42,049. A deeper correction could push prices towards Rs 2,37,630.
Resistance levels are set at Rs 2,47,834, Rs 2,49,199, and Rs 2,53,618.
What will traders have to watch in the future?
The direction of gold and silver is likely to be influenced in the near term by US economic data, Federal Reserve statements, dollar movement, and geopolitical developments. While the general macroeconomic environment is supportive of gold, high prices also allow profit-booking.
For MCX Gold traders, Rs 1,62,271 and Rs 1,61,643 are important downside levels, and Rs 1,64,303, Rs 1,64,931, and Rs 1,66,964 are important upside hurdles.
The medium-term bullish trend remains in place for the moment as long as key support points remain in place, but traders should be on guard for sharp two-way action in the near term.
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