Gold bright, silver dull

The new calendar year has started off on a mixed note for precious metals. While Comex gold closed near its nine-month highs at the end of January, Comex silver price did not share a similar enthusiasm and remained largely range-bound.

The subdued trend in the U.S. Dollar played a key role in helping gold price consolidate the gains posted in the recent months.

Comex gold gained 6.5% in January to end the month at $1,945.3 per ounce. Comex silver posted a marginal fall of 0.85% to close at $23.83 at the end of January. The divergent trend between gold and silver was apparent in the domestic markets, too.

MCX gold gained 3.2% to settle at ₹57,190 per 10 gram. On the other hand, MCX silver remained subdued and posted a marginal loss of 0.8% to end January at ₹68,829 per kilogram.

Due to the subdued performance of silver, the white metal has underperformed gold in January. It remains to be seen if this marks the end of the relative outperformance of silver witnessed until the end of December. Let us wait for further price action to unfold before deciding the relative strength of silver versus gold. The recent rise in Comex gold pushed the price past the target zone of $1,870-$1,880 mentioned in January.

Overbought zone

But the recent uptrend has also resulted in the price reaching the overbought zone and a mean-reversion move is likely.

Comex gold is likely to remain subdued in the short-term and could drop to the immediate support at $1,830-$1,840 zone. Only a move past $1,950 would invalidate the short-term subdued outlook for Comex gold.

Unlike gold, the price action in Comex silver was confined to a range in the past few weeks.

This range-bound price action between the $22-24.5 band is likely to persist in the short-term. A breakout from this range would set the tone for the direction of the next big move in Comex silver. Until then, the recent range-bound price action is likely to continue. In the domestic market, the precious metals ruled firm and MCX gold reached the target of ₹56,700-57,500 mentioned in January.

In the short-term, the price is overbought and a fall to the immediate target of ₹55,000-55,500 is likely. The short-term subdued outlook would be invalidated if the price moves above ₹58,000.

Mirrors global trend

Mirroring the global trend, MCX silver, too, remained subdued in January.

But the price managed to reach the target zone of ₹71,750-72,500 mentioned last month. In the short-term, MCX silver is likely to drop to the immediate support zone at ₹65,600-67,000. This view would be negated if the price moves above ₹71,500.

Conclusion

To summarise, the precious metal prices are likely to remain subdued in the short-term. The answer to the question whether the uptrend in the precious metals is over or not, will depend on how the price action unfolds in the next few months.

(The author is a Chennai-based analyst/trader. This is not meant to be a trading or investment advice)

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