Precious metals lost sheen in June with Comex gold and silver falling to 3-month lows. The strengthening of the US dollar played a key role in keeping the prices under pressure. The U.S. Federal Reserve Chairman indicated the possibility of further interest rate hikes in the near future.

This hawkish tone was another reason behind the subdued price trend, especially during the latter half of June. As a result, precious metals closed on a weak note on a monthly as well as quarterly basis.

After edging past the psychological $2,000-mark in May, Comex gold has since been on a downtrend. Prices fell 2.69% in June to settle at $1,927.80 per ounce. Comex silver lost 2.7% to close at $22.99. Mirroring the global trend, MCX gold closed at ₹58,211, a fall of 3.3%. MCX silver closed 4.2% lower to end at ₹70,030 per kg.

Also read: Gold rises ₹80; silver tumbles ₹550

Contrary to expectations, the price of Comex gold failed to rise. Instead, it slid below the negative trigger level of $1,920-$1,925. The breach of this crucial level suggests the short-term trend is negative. Comex gold could fall to the next downside target of $1,880-1,890. A move past $1,980 would invalidate the chances of a fall to $1,890. Similarly, Comex silver fell below the negative trigger level of $22.6, suggesting short-term weakness. This has pushed the price to oversold level which can trigger a brief up move in the price.

After a rise to $23.5-$24, silver price is likely to resume its downtrend and drop to the next downside target of $21.2-$21.5. A move past $25 would invalidate the negative outlook.

Also read: Return and risk: A ballpark but effective indicator

In the domestic market, MCX Gold remained subdued, and the price also breached the downside trigger level of ₹59,000. This is a sign of weakness and MCX gold could seek lower levels in the near term. As long as the price stays below ₹60,400, there is a strong case for slide to ₹56,500-56,800 zone.

In sync with the global markets, MCX silver price ruled weak. It also fell below the negative trigger level of ₹70,000, suggesting the short-term trend has turned weak. MCX silver can drop to the immediate target zone of ₹67,000-67,500. This view would be negated if the price rises above ₹74,000.

To summarise, the precious metals breached the crucial downside trigger levels in June. Hence, the short-term trend has turned weak, and the price could head to lower levels. The weak outlook would be valid as long as the price sustains below the positive trigger level mentioned above.

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

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