Commodity Radar: Sell gold on rallies, says LKP Securities expert. 5 indicators signal more downside

Gold rates fell by nearly Rs 1,800 or 1% intraday on the MCX on Monday, hitting a low of Rs 1,54,125 per 10 gram amid profit booking. The domestic prices took cues from international markets where yellow metal prices were down on firmer US dollar.

Gold has been under consolidation this month, after correcting 24% (Rs 37,600) from the lifetime peak of Rs 1,93,096 per 10 grams.

Spot gold price on COMEX stood at $5,027.40 an ounce, down $18.90 or 0.4%.

The dollar index today touched a high of 97 against a basket of six top currencies.

Commenting on the current trends, Jateen Trivedi, Vice President - Commodity Research at LKP Securities, said gold has entered a consolidation-to-distribution phase after the sharp spike toward Rs 1,62,000 – Rs 1,63,000. The recovery attempt is losing momentum, and the price is hovering near short-term moving averages, suggesting limited upside unless fresh triggers emerge, he said.

While rupee volatility continues to exaggerate domestic price swings relative to COMEX, the technical structure currently favors corrective downside on rallies, he opined .

Trivedi sees more downside in the yellow metal, suggesting a sell on rise. He lists five indicators to back his analysis.

1. Key support & resistance

After the strong vertical rally and subsequent sharp rejection from Rs 1,62,000+, price has formed a lower high structure. The recent candles indicate supply emerging near the Rs 1,56,000–Rs 1,58,000 zone.

Immediate resistance is seen at Rs 1,56,000–Rs 1,55,800 (supply zone) while major resistance at Rs 1,58,500–Rs 1,60,000.

On the downside, immediate support is seen at Rs 1,53,000 while major support is at Rs 1,52,000–Rs 1,50,500.

A sustained break below Rs 1,52,000 could open room toward Rs 1,48,500 in extension.

2. Momentum indicator

RSI is near 52, reflecting neutral momentum after a sharp drop from overbought territory above 70. The failure to regain bullish momentum above 60 indicates loss of strength. This supports a sell-on-rise bias rather than aggressive long positioning.

3. Bollinger bands

Price is hovering around the middle band after a strong rejection from the upper band. Band expansion followed by contraction indicates cooling volatility. Failure to reclaim the upper band suggests upside exhaustion in the near term.

4. Moving averages

EMA 8 has flattened and is attempting to cross below short-term price action. EMA 21 is turning neutral after an earlier bullish slope. Price trading around these averages signals indecision, but the inability to sustain above EMA 8 favors a mild bearish bias.

5) MACD

MACD histogram has narrowed, showing weakening bullish momentum. A potential bearish crossover is developing, which may confirm downside pressure if resistance holds.

Gold trading strategy: Sell on rise

Sell Zone: Rs 1,55,800 – Rs 1,56,000

Stop Loss (Closing Basis): Above Rs 1,58,500

Targets: Rs 1,53,000 – Rs 1,52,000

As long as the price fails to close above Rs 1,58,500, rallies toward Rs 1,56,000 should be used as selling opportunities, targeting a gradual corrective move toward the Rs 1,52,000 zone.

(Disclaimer: The recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times.)