Gold prices edged lower on Thursday, May 25. On the Multi Commodity Exchange (MCX), gold futures were trading at Rs 59,670 per 10 grams, after recording a fall of 0.32 percent. Globally, spot gold held steady at $1,957.49 per ounce by 0300 GMT. US gold futures fell 0.3 percent to $1,958.60.

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The trigger

Gold prices traded in a narrow range as investors awaited developments in the drawn-out debt ceiling negotiations, while a stronger dollar capped advances. The dollar index held firm close to the previous session's high, keeping a lid on gold prices, according to news agency Reuters.

Bullion has been attempting to recover from its previous sell-off, but a stronger dollar and higher US Treasury yields continue to keep the upside in check, which seems to override safe-haven flows around the US debt ceiling situation, Yeap Jun Rong, a market analyst at IG was quoted as saying in Reuters report.

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The outlook

Analysts expect gold prices to remain volatile for the session due to continued uncertainty around the US debt ceiling situation.

According to Rahul Kalantri, VP of Commodities at Mehta Equities, gold has support at $1,946-1,934 per ounce while resistance at $1,968-1,979 per ounce. In the Indian rupee terms, gold has support at Rs 59,740-59,580 per 10 gm, while resistance is at Rs 60,180, 60,390 per 10 gm.

Investment strategy

Tejas Anil Shigrekar, Commodities and Currencies Senior Technical Analyst at Angel One Ltd, thinks that the short-term bearish trend is projected to revert into neutral or bullish territory.

"We need to keep a close eye on important support levels of Rs 59,500 per 10 gm. As long as the price of MCX gold continues to be significantly below Rs 59,770 per 10 gm, short trades could be advantageous," he said.

He added that on a technical basis, currently, the RSI (14) is below 70, indicating that it is in an overbought zone, with negative divergence. "Prices are trading above their 50-day exponential moving average (EMA). However, when we look at the longer timeframe on the chart and use the fibonacci retracement tool, prices hold support near the 78.60 percent fib ratio and likely form a double bottom pattern, indicating that the prices will revert in the short run. Keeping this support level in mind, trend traders should not hesitate to buy gold at this level," he said.

Shigrekar suggests buying MXC gold at Rs 59,800 per 10 gm with a target of Rs 60,450 to Rs 60740 per 10 gm.

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