The prices of gold and silver have recovered off recent lows, aided by buying interest, weakness in stock markets and the U.S. dollar.
Gold price at the Comex closed at a seven-week peak of $1,311.1 an ounce at the end of May.
The price of silver, however, did not reflect the same buoyancy and it closed at $14.57 an ounce by the end of May 2019. This represents a month-on-month fall of about 2.2% while gold gained almost 2% in May.
In the domestic market, the precious metals reflected a similar price trend at the Multi Commodity Exchange (MCX), India. The price of gold futures at the Multi Commodity Exchange (MCX), closed on a firm note at ₹32,237 per 10 gram. Silver futures at MCX settled at ₹36,430 per kg. After a brief rally early in May, the price of gold and silver eased during the middle of the month. The escalation in the U.S.-China trade dispute weighed on stock markets globally boosting demand for precious metals during the early in part of May 2019. This, in turn, boosted the demand for precious metals. The trend in precious metals weakened in during the middle of the month only to recover sharply in the last week of May.
Based on the recent price action, the short-term outlook for gold and silver appears marginally positive. The price of gold at the Comex is likely to edge higher to the immediate resistance area at $1,322-$1,325 range in the near term. A breakout past $1,326 is likely to push the price to the next target of $1,335-1,340 an ounce. Until the support level for gold at $1,260 is not breached, a rise to $1,322-1,325 would be the favoured view.
The short-term outlook for silver is not too different from gold. A rise to the immediate resistance at $14.9 – $15.20 an ounce is likely. A move above $15.2 would add impart further momentum to the uptrend. A fall below $14.30 would invalidate the short-term positive outlook for silver.
Domestically, the outlook for gold and silver appears positive. The gold price at MCX is likely to rise to the immediate resistance level at ₹32,750-32,800 per 10 gram. A fall below ₹31,500 would invalidate the short-term positive outlook for gold. Below ₹31,500, gold price could drop further to the ₹30,550-30,700 zone. Until the price falls below ₹31,500, a rally to ₹32,800 would be the preferred outcome. The short-term outlook for silver at MCX is no different. The price of silver at MCX is likely to move up to the immediate target of ₹36,950-37,150 per kg. The positive outlook for silver would be invalidated if the price falls below the support level at ₹35,800.
To summarise, the outlook for precious metals appears moderately positive.
The overall long-term trend however remains neutral to weak. Based on the recent price action, it will not be appropriate to entertain any significant upside in precious metals. A mild recovery after the recent slide seems likely.
(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 movement in gold and silver futures at COMEX and Multi Commodity Exchange of India. This is not meant to be a trading or investment advice. The author shall not be held responsible for the outcome of any decision based on the views/opinion featured in this column)