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Consolidating the gains recorded in October, precious metals marched higher last month and closed at near 7-month highs. A weak U.S. dollar and expectations of an interest rate cut by the U.S. Federal Reserve played a key role in bolstering sentiment towards precious metals.
As a result, Comex gold closed 3.2% higher and closed above the psychological $2,000 level at $2,0.57.2 at the end of November. The gain in Comex silver was even more pronounced with the white metal posting an 11.8% gain to settle at $25.66 an ounce. Mirroring the trend in the global markets, MCX gold gained 2.2% in November and closed at ₹62,630. MCX silver outperformed gold and recorded a 5.8% gain to settle at ₹77,555 per kilogram.
The price action in Comex gold was in sync with last month’s expectations. Comex gold ruled firm and also hit the target zone of $2,035-2,040 mentioned last month. The price recently retraced after scaling to a life-time high of $2,152 on December 4.
While the medium-term outlook is positive, Comex gold could rule weak in the short-term. A drop to the immediate support zone of $1,960-$1,980 appears likely. Only a move above $2,060 would impart momentum to the upside. Else, expect gold price to be range-bound or witness a downward drift.
The price of Comex silver managed to break out above the high of the prior trading range of $20.6-$24.2. As anticipated, the upside breakout imparted momentum to the price, helping it to reach a high of $25.7 on November 30. The short-term outlook is positive, and the price could head to the immediate target of $24.75-$25.25.
A move above $23.9 would impart further momentum to the upside, while a fall below $23 would delay the progress to the above target zone.
Mirroring the global trend, MCX gold ruled firm in November and also reached the target zone of ₹61,750-₹62,250 mentioned last month.
The recent rally has pushed the price to overbought zone and a short-term pull back is currently underway. The price could drop to an immediate target of ₹59,800-₹60,500 zone. Only a move above ₹62,800 would invalidate this view.
As observed last month, the break out above the upper end of the prior trading range at ₹73,000 resulted in a sharp rise in MCX silver. After touching a high of ₹77,725, MCX silver price has been consolidating in a tight range in the past few days.
Weak outlook
The short-term outlook is negative and silver price could drop to the ₹69,500-₹70,500 zone. A move above ₹76,400 would invalidate this outlook. To summarise, the short-term outlook for the precious metals is not positive. Only a move above the levels mentioned above would invalidate this weak outlook.
(The author is a Chennai-based analyst/trader. The views and opinion featured in this column are based on analysis of short-term price movement in gold and silver futures at COMEX & Multi Commodity Exchange of India. This is not meant to be a trading or investment advice)
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