By Prijath Babu

Indian gold futures continued to surge for last two days tracking the movements in international gold spot. Indian gold futures consolidated with negative bias since 4^th January and end up with upside breakout infusing positive momentum for last two days. International gold started its recovery since 29^th December and retraced more than 61.80 percent compared with last downswing wave. Indian gold continued the same mood until 4^th Jan there after shown divergence compared with international movements. Rupee started its strong recovery against dollar from 2^nd January onwards, extending the logic the most probable reason for divergence in gold might be hedging commitment due to this change in scenario.

The most priced question right now to ponder is that whether gold can uphold its safe haven appeal?  As per Reuters, European leader might signoff for a permanent rescue fund for European zone on Monday. Greece has to address its internal issues for addressing its debt restructuring problems. US economy slow growth rate less than expected rate can also influence investors’ sentiments. Gold demand from East Asian countries especially in china dropped since the most of the market closed for lunar holidays. In India, physical demand might slow down due to increase in import duty by 2 percent.

International spot likely to continue its buying mood as long as 1710 hold the firm support in the initial hours with possible resistance at 1750/ 1765/1780 levels. However if prices couldn’t sustain above 1710 levels can trigger profit booking corrective moves towards support at 1696/1662 levels. Trend reversal is not anticipated until the break out of support at 1640 levels.

Technical Outlook for the week ( Feb Contract)

Strong upside moves are expected as long as the counter upholds the support at 27900. However downside penetration of this level will create much room for profit booking corrective moves and immediate support at 27760/27600 will be crucial for the counter to revert back to the underlying positive mood in the counter; in such case support at 27760 /27600 levels will be crucial for the counter. In case of strong upside moves, resistance at 28130/28290/28620 has to be surpassed with strict discipline. Violation more than 38.20 retracement of the rally might trigger liquidation pressure in the counter. Any move below 27300 will overshadow the technical significance of the undergoing wedge breakout.

The author is a market expert and can be contacted [email protected]