The World Gold Council (WGC) released the latest gold statistics last week and data shows that demand for the yellow metal in the third quarter of 2021 fell 7 percent (y/y) to around 831 tons. The decline was seen after the increase in the past two quarters. The decline in demand was mainly driven by ETFs (exchange traded funds) which saw a net outflow of 27 tons compared to an inflow of 274 tons in the same quarter of the previous year. Jewelery demand rose 33 percent at nearly 443 tons and technology demand rose 9 percent. Central banks net purchases amounted to 69.3 tons, compared to a net sale of nearly 11 tons.
The data suggests that lower gold prices, taken with the economic recovery, boosted demand for jewelry, while investors were frustrated by the returns of unloading ETFs. The demand to date also witnessed a decrease to 2,663 tons compared to 2,939 tons during the same period last year.
There has been a price recovery since October which could attract ETF investment. We hope the economic recovery will maintain consumer confidence towards jewelry. However, the price of gold remained largely flat and the price of silver saw a marginal correction over the past week as the overall commodity market came under pressure.
In the international spot market, gold lost about 0.5 percent and ended the week at $1,782.8, while silver lost 1.9 percent and closed at $23.85 an ounce. Similarly, on the Multi Commodity Exchange (MCX), gold futures fell 0.3 percent for the week, closing at 47,635 euros (per 10 grams) and silver corrected 1.7 percent to end the week at 64,534 euros (per 1 kg).
MCX Gold ($47,635)
The uptrend in gold futures (December series) appears to be being challenged as it failed to break the resistance at INR 48,000 last week. Although it rose beyond this level early on and made a high of $48,299, the contract was not able to hold above the level and fell below INR 48,000 in the following session. It can be assumed that the short-term uptrend is still in place but there could be a slight correction before the contract decisively breaches $48,000.
The bullish slope is supported by the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) on the daily chart as they remain in their positive territory. The price is above the 21 and 50 day moving averages (DMA) and as long as the price is above the Rs 47,000 support, the upside trend in the near term will not be threatened. However, given the prevailing conditions, a price correction to $47,000 cannot be ruled out.
Traders who are already holding long positions can hold and others can wait until now and buy when the price drops to $47,000. In either case, the initial stop loss can be placed at $46,500. A recovery from $47,000 can quickly raise the contract to $48,000. If the contract breaks out of this level and reaches $49,000, consider locking half of the profits and shifting the stop-loss order to $48,000. The remaining positions can be liquidated if the contract touches 50,000 rubles.
Closest support from current levels can be spotted at $47,000 and ₹46,000.
MCX – Silver (INR 64534)
Silver, which has outperformed gold since the beginning of the month, fell and recorded a loss of 1.7 percent, while gold witnessed a slight decline in prices last week. Even with the December futures open on Monday, the contract quickly turned back and slipped during the week.
However, the decline is more likely to be a corrective decline than a reversal of the downtrend. In support of this, the contract has a range of support from the current level of 64,534 INR. There is support at $64,300 which is below the 21-day moving average at $63,280 and after that, there is support at $62,500. Therefore, this means that there is a high probability of the contract resuming the upward trend within the price range of 62,500 and 64,300 INR. Until the price remains above these levels, the trend will continue to the upside. The daily chart’s RSI and MACD continue to remain in bullish territory.
Considering the above factors, one can buy at Rs 63,280 and accumulate when the price falls to Rs 62,500 and keep the initial stop loss at Rs 61,000. The probability of silver futures falling below Rs 62,500 is lower, and if it returns to the upside, the first resistance it might encounter could be at Rs 66,700. A breach of this level could raise the price up to 70,000 INR. Therefore, half of the long positions at INR 66,700 can be liquidated with the stop loss revised upward to INR 65,000. Exit the rest of the long deals at INR 70,000.