Dollar rally hits gold, silver
The weakness in precious metals witnessed in July spilled over to the month of August as well. After a recovery in the early part of the month, precious metals lost sheen in the latter half of August.
The rally in the U.S. dollar and expectations of an aggressive interest rate increase by the U.S. Federal Reserve affected sentiment towards precious metals.
As a result, Comex gold fell 3.1% in August to close at $1,726.2 an ounce. Comex silver recorded a much steeper cut of 11.5% to settle at $17.88 an ounce.
In the domestic market, MCX gold futures fell 2.4% to ₹50,414 per 10 gm. MCX silver futures lost 10.6% to settle at ₹53,151 per kg.
In line with expectations, the Comex gold price hit the target of $1,825-1,835 mentioned last month. After recording a high of $1,825 on August 10, the price turned weak in the latter half of August.
The short-term outlook for Comex gold remains weak and the price could drop to the $1,660-1,670 zone.
A break below the crucial support level of $1,645 will be a major sign of weakness and could push the price to further lows. Below $1,645, Comex gold could slide to $1,600-1,610. The price has to close above $1,775 to invalidate the weak outlook.
Similarly, Comex silver price, too, staged a sharp recovery in the early part of August but the recovery was not strong enough to push the price to the then mentioned target zone of $21.5-22.
Silver price recorded a high of $20.87 on August 15 and turned weak thereafter. The short-term outlook is negative, and the price could slide to the next support at $16.5-16.60. A move past $18.7 would invalidate the weak outlook.
In the domestic market, MCX gold price has been consolidating in a broad range of ₹49,900 to ₹52,600 in the past four months. The price now is near the lower end of this range. A break below ₹49,900 will be a sign of weakness and could push the price lower to ₹48,000-48,400. Only a move above ₹51,750 would invalidate the negative outlook for MCX gold.
MCX silver, too, ruled weak last month and has been in a steady downtrend for a while now.
The short-term outlook remains negative and a fall to ₹47,500-48,500 appears likely. Only a close above ₹55,400 would invalidate the negative outlook for MCX silver.
To summarise, the short-term outlook for precious metals is negative. Unless the price moves above the levels mentioned above, expect the recent weakness to persist in precious metals.
(The writer is a Chennai-based analyst / trader. This is not meant to be a trading or investment advice)