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Gloss dims on price weakness

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Precious metals lost their sheen in April with both gold and silver closing on a weak note at the end of the month. Concerns around the possibility of aggressive interest rate increases by the U.S. Federal Reserve, along with the spike in the dollar played a key role in keeping precious metal price subdued in April.

Comex gold lost 2.2% in April to close at $1,911.7 an ounce. Comex silver saw a much deeper cut of 8.2% in April to settle at $23.09 an ounce.

Mirroring the global trend, MCX gold futures fell 0.79% to ₹51,754 per 10 gm. MCX silver futures lost 5.6% to settle at ₹64,349 per kg, at the end of April.

Comex gold price is still confined in the $1,880-$2,005 range. The short-term outlook hinges on the direction of the breakout from this range. Though there was a brief poke a few days ago, below the lower end of the range, the price staged a sharp recovery immediately.

The short-term outlook is positive and a move to $1,960-1,980 appears likely. The positive view would be invalidated if the price closes below $1,850. A drop below $1,850 could push the price lower to the 1,800-1,810 zone.

The short-term outlook for Comex silver appears weak and the price could dip to the immediate target zone at $21.75-22.20. The price has to move past $24.5 to invalidate the negative outlook. Breaching $21.5 would be a major sign of weakness and could push the Comex silver price to the $20.40-20.50 range.

The MCX gold price moved past the positive trigger level of ₹52,400 that was mentioned last month. The price touched a high of ₹53,663 on April 18 before receding. The short-term outlook remains positive.

A move past ₹53,350 would propel the MCX gold price higher to the major target zone of ₹54,500-55,000. The positive outlook would be invalidated on a close below ₹49,500.

As observed last month, MCX silver remained weak and drifted below the lower end of the trading range at ₹64,000. The breach of the lower end of the trading range is a sign of weakness and the price could drift lower to the ₹59,500-60,000 zone. Only a close above ₹67,000 would invalidate the negative outlook for MCX silver.

To summarise, the short-term outlook for precious metals depends on the breakout past the trigger levels mentioned above. As observed last month, it would be prudent to wait for prices to breach either of the levels, before concluding on the direction of the next move.

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



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