After rough start, gold, silver cool off

Image used for representational purposes.
| Photo Credit: Getty Images/iStockphoto

Precious metals price behaviour turned volatile last month. After initial weakness, precious metals managed to claw their way back during the middle of the month. Comex gold edged past the psychological $3,500 mark to scale a fresh all-time high of $3,509 on April 22. The prices have since cooled in the past few days.

Hope of a possible de-escalation in the U.S.-China tariff war played a key role in pulling the precious metals to lower levels in the past few days. Comex gold posted a 4.5% gain in April to end the month at $3,299.2. Comex silver remains a relative under-performer in comparison with gold and lost 5.6% in April to settle at $32.82.

Mirroring the trend in the global markets, the MCX gold price gained 4.3% to settle at ₹94,611 per 10-gram at the end of April. Reflecting weakness in international markets, MCX silver too closed 5.8% lower at ₹96,833 a kg. 

As observed last month, the price of precious metals is overextended from the mean and therefore, a cool-off is likely. Unless Comex gold price crosses above the resistance level at the $3,400-$3,410 zone, there is a strong possibility of a slide to the next support zone at $3,140-$3,150. The long-term trend, however, remains positive, and the price could resume its uptrend on the completion of the anticipated short-term cool-off.

Comex silver price remained weak last month and dropped to a low of $27.55 on April 7 and managed to recover thereafter. The prices, however, have turned weak in the past few days. The short-term outlook for Comex silver stays weak, and the price could head to the next support zone at $26-$26.50. Only a move past $34.5 would invalidate the short-term negative outlook. From a medium-term perspective, Comex silver price may oscillate in a broad range of $25-$35.

MCX gold price moved closer to the psychological ₹1,00,000 level in April but receded to lower levels in the past few trading sessions. The short-term outlook for MCX gold is weak, and the price could drop to the next target zone of ₹84,500-₹85,000. Unless the price moves above ₹99,000, there would be a strong case for an easing off to the ₹86,500-₹88,500 zone.

As observed last month, the short-term outlook for MCX silver is negative. The price could drop to the immediate support ₹90,500-₹91,500 zone. Only a move above ₹1,05,000 would trigger further upside momentum.

Conclusion

To summarise, precious metal prices are in a cool-off phase and prices could remain subdued in the near term. The long-term trend, however, remains positive.

(The author is a Chennai-based analyst/trader. The views and opinions featured in this column are based on the analysis of short-term price movements in gold and silver futures at the COMEX & Multi Commodity Exchange of India. This is not meant to be trading or investment advice.)