Gold has been trading in a tight range of 85000—86580 for a long time, showing a lack of strong directional movement. The big question now is whether gold will break down or rally from here. While predicting the exact move is always uncertain, we can analyze potential reasons for another rally based on technical and fundamental factors.
Understanding the USDINR-Gold Relationship
The USDINR exchange rate and gold prices in India share an inverse relationship most of the time. Since India imports most of its gold, any movement in USDINR directly affects domestic gold prices. When the USDINR rate rises, it means the Indian Rupee is weakening against the US Dollar, making gold more expensive in India. Conversely, when the USDINR falls, gold prices in INR terms tend to drop because the Indian Rupee is stronger and can buy more gold for the same amount of money.
Another important factor is global gold prices, which are usually influenced by factors like US interest rates, inflation, and market uncertainty. If USDINR moves up while global gold prices are stable or increasing, domestic gold prices will rise even faster. On the other hand, if USDINR remains stable but global gold prices drop, MCX gold prices will also decline.
Technical Analysis of USDINR
Looking at the USDINR chart, we can see that the price has been trading in a range but is showing signs of movement. 86.8—87 is a major support zone, where the price has reacted multiple times in the past. Additionally, a double bottom pattern is forming around 86.5, which is generally a strong reversal pattern. If the price respects this support and starts moving up, we can expect a rally in USDINR. If the breakout happens, the first target will be 87.59, which is the next resistance level. If USDINR successfully breaks this level and retests it as support, we could see further upside momentum, leading to a second target of 87.97. Bur also if by any global reason, USDINR happens to break 86.5 then we may see a more volatile and indecisive market during that time frame.
Impact on Gold Prices in MCX
Since USDINR directly affects gold prices in India, any significant movement in the exchange rate will reflect on MCX gold rates. If USDINR moves up towards 87.59 and then 87.97, gold prices in MCX will likely rise as well.
To calculate the expected MCX gold price based on USDINR movement, we use the formula:
MCX Gold Price = ( COMEX Gold Price × USDINR​)
31.1035
1st Target: USDINR at 87.59
New MCX Gold= 2929.83×87.59​ = 8264.57 + Import Duties and Taxes (roughly 9%)
31.1035
The percentage increase from the current USDINR (87.1310 to 87.59) is 0.53%. Applying the same increase to MCX gold:
New MCX Gold=86,260×(1+0.53%)= 86,718+9%= ₹89,932
2nd Target: USDINR at 87.97
New MCX Gold= 2929.83×87.97 = 8302 + Import Duties and Taxes (roughly 9%)
31.1035
Percentage increase from 87.1310 to 87.97 is 0.96%. Applying the same to MCX gold:
New MCX Gold=86,260×(1+0.96%) = 87,089+ 9%= ₹90,322
The final MCX gold price estimates are:
- If USDINR reaches 87.59 → MCX Gold may rise to ₹89,932
- If USDINR reaches 87.97 → MCX Gold may rise to ₹90,322
Final Thoughts
- At this stage, the market is at a crucial point. If USDINR holds the support zone and moves up, we may see a strong rally, which will push gold prices higher upto ₹89,932 and ₹90,322 eventually. However, if USDINR fails to hold the support and breaks down, gold prices might consolidate or decline depending on global market conditions. Traders should closely watch price action near the support zone of 86.8—87 and look for volume confirmation before taking any positions.
Until then, Happy Trading!
Commodity Samachar Securities
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