Gold, silver lose sheen

After ruling strong for the best part of February, precious metals lost sheen towards the end of the month. Comex gold climbed to the highest level in seven years last week on growing concerns relating to the economic impact of the rapid spread of COVID-19. The weakness in global equity markets also played a part in fuelling the sentiment.

Comex gold touched a high of $1,692 an ounce on February 24 before cooling off drastically in the last few trading sessions. Comex silver recorded a high of $18.92 on Thursday and since remained subdued.

Comex gold fell 1.34% in February to settle at $1,566.7 an ounce while silver lost 9% to settle at $16.39 an ounce. In the domestic market, the gold futures price on the MCX rose 0.9% in February to ₹41,397 per 10 gm. MCX silver futures slipped 6.5% in the month to ₹44,403 a kg.

As observed in the previous piece, Comex gold ruled firm and also moved well past the then mentioned target price of $1,625-1,630 an ounce. The short-term outlook for gold is negative and a fall to the immediate target zone of $1,510-1,520 appears likely. The negative view would be invalidated if the price moves above the resistance level at $1,625-1,630 zone.

Comex silver, too, hit the target price of $18.8-19.1 an ounce mentioned in the previous post. The short-term outlook for silver, too, is negative. A drop to the short-term support of $15.5-15.7 appears likely.

A drop below $15.4 would impart further weakness and the price could then drop to $14.8-15. The negative outlook would be under threat if the silver price were to close above the $17.2-17.4 zone. The gold futures price at MCX ruled firm in February and hit the target price of ₹41,600-41,800 per 10 gm mentioned last month. MCX gold may remain subdued in the short-term and the price could slip to ₹39,800-40,200. A move past ₹43,100 is needed to invalidate the negative outlook. The short-term outlook for MCX silver is not too positive. The MCX silver price moved to the target zone of ₹48,800-49,000 mentioned last month and has since turned weak in the last couple of trading sessions.

MCX silver is likely to remain subdued in the short-term and the price could slip to ₹41,500-41,750. A drop below ₹43,800 would confirm the negative outlook while a close above ₹46,500 would invalidate it.

To summarise, precious metals have achieved their short-term targets and turned weak from a short-term perspective. It is advisable to remain on the sidelines till there is evidence of te resumption of an uptrend.

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

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Printable version | Oct 24, 2020 8:16:02 AM |

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