Gold, silver consolidate on gains

The subdued trend in the U.S. dollar played a key role in helping precious metals consolidate the gains recorded in November. Comex gold gained 3.7% in December to end the month at $1,826.2 per ounce. Comex silver recorded a much stronger rally of 10.5% to close at $24.04.
| Photo Credit: MICHAEL DALDER

Precious metals consolidated the gains recorded in November and managed to end December on a positive note. Gold prices gained almost $200 from a more than two-year low recorded in September, on hopes that the U.S. central bank might slow its pace of interest rate increases.

The subdued trend in the U.S. dollar played a key role in helping precious metals consolidate the gains recorded in November. Comex gold gained 3.7% in December to end the month at $1,826.2 per ounce. Comex silver recorded a much stronger rally of 10.5% to close at $24.04.

Mirroring the global trend, precious metals closed on a strong note in the domestic markets too. MCX gold gained 3.9% to settle at ₹55,017 per 10 gm. MCX silver gained 9.4% to end at ₹69,413 per kg.

Silver outperforms

Apart from the firm trend in these metals witnessed in the last couple of months, an interesting development is silver’s outperformance  compared with gold. The relative performance chart of these two metals suggests that silver was outperforming gold and there is a case for the trend to sustain in the near term.

Though Comex gold ruled firm, the target of $1,870-1,880 mentioned in December is yet to be achieved. The short-term outlook remains positive and Comex gold appears on course to reach this target zone.

However, a drop below the recent low at $1,740 would be a cause for concern. This would invalidate the outlook and delay the journey towards the target zone.

Positive outlook

The price action in Comex silver was in sync with November’s expectations. Unlike Comex gold, silver managed to achieve the target of $24.5-$25. The short-term outlook is positive and Comex silver is likely to head to the immediate target of $25.5-$26.

A move above $24.6 will strengthen the case for a rise to the target zone. On the other hand, a fall below $23 will be a sign of weakness and can invalidate the positive view.

In the domestic market, the metals managed to seek higher levels. MCX gold ruled firm and reached the ₹55,000-55,500 target. In the short-term, MCX gold is likely to head to the next target of ₹56,700-57,500.

The short-term positive outlook would be confirmed if the price moves above ₹55,400. However, a fall below ₹53,900 would invalidate the possibility of a rise to this target zone.

MCX silver ruled firm in December and moved well beyond the target zone of ₹65,000-65,500. The short-term outlook remains positive, and the price is likely to head to the next target zone of ₹71,750-72,500.

The positive outlook for MCX silver would be confirmed on a move above ₹70,000. A fall below ₹65,000 would and invalidate the view. To summarise, the short-term outlook for precious metals remains positive in the short-term. There are increasing signs suggesting that the prior downtrend for precious metals might be over. Keep a tab on the key levels mentioned above for confirmation of the short-term direction.

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