Gold, silver gain sheen

Weakness in the U.S. dollar and expectations of less aggressive rate increases by the Federal Reserve played a key role in helping precious metals seek higher levels

December 04, 2022 10:37 pm | Updated 10:37 pm IST

The outlook for precious metals remains positive in the short-term. It is however too early to conclude if the recent recovery marks the beginning of a fresh uptrend. For now, the recent recovery comes across as a counter trend move within an overall downtrend.

The outlook for precious metals remains positive in the short-term. It is however too early to conclude if the recent recovery marks the beginning of a fresh uptrend. For now, the recent recovery comes across as a counter trend move within an overall downtrend. | Photo Credit: Diy13

Precious metals reversed eight-month losing streak and closed on a positive note at the end of November. Comex Gold prices rose 3% on December 1 to close above the psychological $1,800 per-ounce mark as the dollar weakened on the expectations of a slower interest rate hike from the U.S. Federal Reserve. Signs of cooling U.S. inflation also helped improve sentiment towards precious metals.

Weakness in the U.S. dollar and the expectations of a less-aggressive rate hikes by the Federal Reserve played a key role in helping precious metals seek higher levels. As a result, Comex Gold gained 7.3% to close at $1,759.9. The performance of Comex Silver was even better with the metal gaining 13.9% to close at $21.78.

In the domestic market, MCX Gold gained 4.7% to settle at ₹52,931 per 10 gm while MCX Silver rose 7.8% to end ₹63,461 a kg. The performance of Comex gold was in line with expectations. As observed last month, gold price ruled firm and also moved well past the then mentioned target of $1,725-1,730. The short-term outlook stays positive, and the price could head to the immediate target of $1,870-1,880. A move past $1,825 would strengthen the case for a rise to the target zone.

While the short-term outlook is positive, a drop below the recent low at $1,730 would be a cause of concern. This would invalidate the positive outlook and could open up further downside possibility for comex gold.

Similar to Comex gold, the price action in Comex silver too was in sync with expectations. The price managed to achieve the target of $22-$22.5 mentioned last month. The short-term outlook is positive and Comex silver may head to the immediate target of $24.5-$25.

The outlook would be strengthened if the price moves above immediate resistance at $23.7. On the contrary, a fall below $20.6 would invalidate the positive outlook.

Domestic market moves

In the domestic market too, the precious metals managed to seek higher levels and the price action was in alignment with last month’s projection. MCX Gold was in an uptrend and reached the target of ₹52,200-53,000. In the short-term, MCX Gold is likely to rise to the next target zone at ₹55,000-55,500.

The positive outlook would be confirmed if the price moves above ₹54,200. A fall below ₹53,200 would invalidate the positive outlook.

MCX Silver ruled firm and hit the target zone of ₹63,000-63,500. The short-term outlook is positive and the price is likely to head to the immediate target of ₹65,000-65,500.

The positive outlook would be confirmed on a move past ₹63,700. However, a fall below ₹59,400 would invalidate the positive view.

To summarise, the outlook for precious metals remains positive in the short-term. It is however too early to conclude if the recent recovery marks the beginning of a fresh uptrend. For now, the recent recovery comes across as a counter trend move within an overall downtrend.

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

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