Gold, silver lose sheen

After a subdued trend in the early part of December, both gold and silver managed to edge up in the second half. Precious metals however lost their sheen in the year 2021 with Comex gold recording its worst yearly performance since 2015.

Going forward, news flow regarding the spread of COVID-19 along with the movement in the U.S. bond yield would play a key role in influencing precious metals’ prices.

Comex gold closed 2.9% higher at $1,828.6 an ounce at the end of December. Comex silver gained 2.3% to settle at $23.35 an ounce.

In the domestic market, MCX gold futures gained 0.6% to close at ₹48,099 per 10 gm. MCX silver futures, too, closed marginally higher at ₹62,660 per kg.

The Comex gold price is still coiling in a tight range, indicating a contraction in volatility. Such contraction is a precursor to a sharp price move. A move past $1,880 or a slide below $1,720 would set the tone for the next big move in Comex gold.

Until either of these levels is breached, expect wild swings based on the news flow regarding the U.S. Federal Reserve’s bond purchase and the spread of COVID-19. It would be appropriate to discuss short-term targets once either of the two levels mentioned above is breached.

Comex silver almost tested the target zone of $20.5-21 mentioned last month. After dropping to a low of $21.45, the price recovered in the latter half of December.

The price action in the past few weeks indicated short-term strength in Comex silver. The price could head to the immediate target of $24.5-25. This view would be invalidated if the price closes below $21.

Mirroring the global trend, MCX gold price too was confined to a narrow trading range. Either a move above ₹48,500 or a drop below ₹47,000 would set the tone for the next significant directional move. Until either of these levels is breached, expect volatile and range-bound price action to persist.

Above ₹48,650, expect a rise to ₹50,500-51,000. Below ₹47,000, MCX gold could slide to ₹46,000-46,500.

MCX silver price too is consolidating in a tight range. The short-term trend would depend on either a move above ₹63,500 or a fall below ₹58,300. It would be premature to predict the direction of the breakout and would be prudent to wait for the price to display its intention.

To summarise,precious metals are consolidating in a narrow range. Though a big directional move is round the corner, it would be prudent to wait for confirmation from the price action. Until then, it would be advisable to stay light and avoid big exposures in precious metals.

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

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Printable version | May 21, 2022 1:39:47 am |