Gold Outlook I Details explained by ICICI Securities

Gold price today: The yellow metal opened slightly higher with a gap on Monday and fell gradually during most of the session till a fresh 10-month low of Rs 45215.  Prices have been falling gradually in the last few weeks as higher yields threaten gold’s hedge against inflation status, since they translate into higher opportunity cost of holding bullion, which pays no return. Overall, ICICI Securities expect gold prices to consolidate in the range of Rs 45000 – Rs 46000 levels in the short-term.
 
The US$INR March futures fell marginally on the back of profit booking as OI fell 10% along with the price. However, as the Dollar index is sustaining near 91 levels, we feel weakness could continue and the pair may head towards Rs 74 levels. The dollar-rupee March contract on the NSE was at Rs 73.78 in the last session. The open interest fell almost 10.1% in the March series. Intra-day strategy is to Buy US$INR in the range of Rs 73.70 – Rs 73.72.
 

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Technical Outlook:
 
The daily price action formed an inside bar as index oscillated within Friday’s trading range (14919-14468), indicating pullback after Friday's sharp decline (-3.75%) and attempt to hold the 50% retracement of February rally (13597-15432), at 15514. The index is undergoing a healthy retracement as over the past 10 sessions index has retraced 50% of preceding 11 sessions sharp up move, indicating robust price structure. Therefore, ICICI Securities do not expect the Nifty to breach the key support threshold of 14300.
 
Meanwhile, to confirm the pause in the ongoing corrective phase the index needs to form a higher high-low and decisively close above immediate resistance of 14900. Failure to do so would lead to prolonging of ongoing consolidation in the broad range of 14900-14300 amid stock specific action as we expect relative outperformance of the broader market to endure. Hence, buy on dips strategy in quality large cap and midcap stocks should be adopted as the broader structure remains positive. Broader markets maintained their relative outperformance. In the process, Nifty midcap clocked a fresh all-time high. In contrast, the small cap index is still 15% away from its life-time highs. Thus, catch up activity would be seen in small caps.