Gold needs to clear this hurdle for sentiment revival, shows chart

The MCX Gold October futures need to overcome the resistance at Rs 59,930, for fresh buying to emerge, indicates technical chart.

The downgrade of the US credit rating by Fitch has brought the focus back on investments in safe-haven assets such as Gold. The Fitch on Tuesday downgraded the US credit rating by a notch to 'AA+' from 'AAA'.

On Wednesday, MCX Gold and Silver futures logged smart gains in intra-day deals, but eventually the rally fizzled out. The 

MCX Gold October futures rallied 0.7 per cent to a high of Rs 59,811, but finally ended with a modest gain of 0.1 per cent at Rs 59,471 on Wednesday. Whereas, Silver futures gained 1.2 per cent in intra-day deals, but ended 1.3 per cent lower at Rs 72,960.

Analysts say that the rating downgrade, reflects heightened concerns over the stability of global financial markets and hence investors may seek refuge in gold.

"Gold has been giving strong place in investors’ safe investment allocation. With many crises passed from the China US Trade War, Pandemic, Russia Ukraine war and now US debt crisis, Gold will be on investors top list to keep funds allocated in times of uncertainty.", says Jateen Trivedi, VP Research Analyst at LKP Securities.

Echoing similar views, Hareesh V, Head of Commodities at Geojit Financial Services said, "Gold prices slightly gained after the US government's credit rating was downgraded by Fitch. Usually, economic uncertainties and dollar volatility can have significant impacts on the price and demand for gold as it is considered a safe-haven asset. The rating downgrade of the world's largest economy tends investors to park their money in relatively safer assets like bullion."

Given this backdrop here's what the charts suggest for the MCX Gold futures.

MCX Gold October futures

Bias: Neutral

Last close: Rs 59,471

Support: Rs 58,300; Rs 57,350

Resistance: Rs 59,930; Rs 60,800

The MCX Gold futures are seeking direction, after having been range-bound since July. Off late, the MCX Gold October futures were trading below the short-term, 20-DMA (Daily Moving Average).

Further, the 20-DMA at Rs 59,610 is below the 100-DMA which stands at Rs 59,990, but above the 50-DMA at Rs 59,445. Thus, indicating mixed signals on the daily chart.

On the weekly chart, the MCX Gold futures contract seems to be struggling to hold on to the 20-WMA (Weekly Moving Average), which stands at Rs 59,930 since the last six weeks. Hence, the overall bias is likely to remain tepid as long as the Gold futures trade below Rs 59,930.

A weekly close above Rs 59,930 can revive the sentiment, and then Gold futures can potentially rally and hit fresh record highs, with a rally towards Rs 62,800-odd levels.

On the flip side, immediate support for Gold futures stand at Rs 58,300 level, the weekly chart shows. 

On a broader time-frame, the yearly Fibonacci chart suggests that the bias for Gold in 2023 is likely to remain positive as long as Gold sustains above Rs 57,350. On the upside, sustained trade above Rs 60,800, can trigger fresh momentum.

MCX Silver September futures

Bias: Bias

Last close: Rs 59,471

Support: Rs 58,300; Rs 57,350

Resistance: Rs 59,930; Rs 60,800

Unlike MCX Gold futures, the MCX Silver futures have experienced sharp volatility in the last one-month, with prices swinging over 14 per cent during the period. 

Silver futures rallied Rs 67,000-odd levels at the end of June to over Rs 76,000 levels in July. 

Presently, Silver futures have dipped below the 20-DMA, which stands at Rs 74,200. Further, the 20-DMA is firmly above the 50- and 100-DMAs, which stand at Rs 72,250 and Rs 72,770, thus implying a likely positive bias based on the moving averages price action.

The daily chart shows that Silver futures are testing support around the 50- and 100-DMA levels. As long as the support holds, a pullback towards the 20-DMA seems imminent. 

Thereafter, Silver futures will need to sustain above the 20-DMA to gain fresh strength. On the upside, the Silver futures can potentially rally to Rs 77,000-mark.

On the other hand, sustained trade below the key support levels, can trigger a slide towards Rs 69,000 level, the weekly chart shows.

The yearly Fibonacci chart suggests that Silver futures can scale the Rs 80,000-mark in this calendar, provided the commodity forms a strong base above Rs 74,150.