Precious metals remained lacklustre in May and closed on a weak note for the second month in succession. The strengthening of the U.S. dollar along with the rise in U.S. treasury yields dented sentiment around precious metals.
As a result, Comex gold lost 3.3% in May to close at $1,848.4 an ounce. Comex silver saw a much deeper cut of 6.05% to settle at $21.69 an ounce.
Mirroring the global trend, MCX gold futures fell 2.2% to close at ₹50,847 per 10 gm. MCX silver futures dropped 5% to settle at ₹61,125 a kg, at the end of May.
The Comex gold price dropped below the lower end of the prior trading range of $1,880-$2,005. As anticipated, this breach triggered a further slide, and the price tested the target zone of $1,800-1,810 that was mentioned last month.
Comex gold dropped to a low of $1,785 on May 16 and has since recovered over the last couple of weeks.
The short-term outlook remains weak and a drop below $1,825 will confirm the resumption of the recent downtrend. Unless the price moves above $1,925, a slide to $1,770-1,780 would be the preferred outlook.
The price action in Comex silver was in line with expectations. As observed last month, the price ruled weak and fell to the target range of $20.40-20.50. After recording a low of $20.4 on May 13, the price managed to recover some ground in the past few weeks.
The short-term outlook for silver remains weak and the price is likely to slide to the next target of $20.2-20.4. This view would be invalidated if the silver price closes above $23.5.
In sync with the global trend, MCX gold, too, ruled weak last month. The short-term outlook remains negative and the MCX gold price could drop to ₹48,500-49,000 per 10 gm. Only a move above ₹53,500 would invalidate the short-term negative outlook.
As observed last month, MCX silver remained weak and fell to the then mentioned target zone of ₹57,500-58,000. The short-term outlook remains weak and a fall to ₹57,000-57,500 appears likely. A fall below ₹60,500 would confirm the short-term negative outlook. Only a close above ₹64,500 would invalidate the negative outlook for MCX silver.
To summarise, precious metals have breached the lower end of the prior trading range, suggesting short-term weakness. There is a case for a slide to the lower target zones mentioned above.
(The writer is a Chennai-based analyst / trader. Views and opinion featured in this column are based on the analysis of short-term price movement in gold and silver futures at COMEX & Multi Commodity Exchange of India. This is not meant to be trading or investment advice)
