Last week, the gold futures contract traded on the Multi Commodity Exchange (MCX) fell 1.3 per cent, decisively breaching its 21- and 50-day moving averages and closed at `30,813 per 10 gm. The contact also closed below the key support at `31,000. But it advanced `122 or 0.4 per cent to trade at `30,935 on Monday.
Strong move beyond `31,000 in the near-term will make the contract’s recent fall below this level as a false breakout. In that case, there is more likelihood of the contract trending upwards to `31,500 which is a vital resistance.
Since registering this year’s high at `32,455 in July, the contract has been on a short-term downtrend. To alter this downtrend, the contract needs to breach the vital resistance at `31,500. Then an up move to `32,000 is possible in the short term. Significant resistance beyond this level is placed at `32,500. On the other hand, inability to move beyond `31,500 will keep the contract moving sideways in the band between `30,750 and `31,500.
An emphatic fall below the immediate support at `30,750 can pull the contract down to `30,500 and `30,000 in the short term. The daily as well as weekly relative strength indices are featuring in the neutral region.
Traders with a short-term perspective should trend with caution and consider initiating fresh long positions on a strong rally beyond `31,000 with a fixed stop-loss, for an initial target of `31,500.
On the global front, the spot price trades at $1,314 an ounce, up 0.3 per cent. To reinforce bullish momentum, the spot gold needs to emphatically breakthrough the immediate resistance at $1,320 levels. Next resistances are at $1,340 and $1,360 levels. Immediate support is at $1,300.