Trading strategy for gold & silver

By Ravindra Rao

Gold and silver prices traded with cuts in Monday's session tracking weakness in global markets as US stimulus talks came to a standstill. Globally, gold prices eased to an over one-week low in early Asia trade as the dollar firmed. Here is a trading strategy for the bullion counters:

Gold
MCX GOLD is trading near the lower band of the rising trend channel with strong support near Rs 50,500. However, a bearish candlestick pattern on the daily chart with resistance around Rs 51,200 level could limit the upside. Immediate support is seen at Rs 50,640 below which it might possibly fall till Rs 50,500 level. Relative strength index (RSI) is at 49, favouring the bear case.

Strategy

• SELL MCX Dec Gold at Rs 50,950
• Target at Rs 50,500; Stop loss at Rs 51,200

Silver
MCX SILVER has erased its gains from the key resistance level of Rs 64,200 with a formation of bearish candlestick pattern. Meanwhile, strong support is pegged at Rs 61,200, only a sustained move below Rs 61,200 would turn the sideways trend to slightly bearish mode as the price might weaken further towards Rs 59,800. The momentum indicator (RSI) is near 47, indicating bear strength.

Strategy

• SELL MCX Dec Silver at Rs 62,500
• Target at Rs 61,200; Stop loss at Rs 63,000

(Rao is VP-Head commodity research, Kotak Securities )