Gold, silver lose lustre

Precious metals remained range bound and volatile in November. After a rise in the early part of the month, gold and silver receded sharply in the second half to close marginally lower at the end of November. The strengthening of the U.S. dollar and the firming up of U.S. bond yields played a key role in pulling down the prices.

Comex gold closed 0.4% lower at $1,776.5 an ounce at end-November. Comex silver fell 4.7% to settle at $22.85 an once. In the domestic market, MCX gold futures gained 0.3% to close at ₹47,805 per 10 gm. MCX silver futures too closed on a weak note, falling 4.6% to settle at ₹62,287 per kilogram.

Over a longer time frame, the Comex gold price is coiling in a tight range indicating a contraction in volatility. Typically, such a trend is a precursor to a sharp move in price. A move past $1,900 or a slide below $1,720 would set the tone for the next big move.

Until either of these levels is breached, expect wild swings based on the news flow on the U.S. Federal Reserve’s bond purchase and the spread of the COVID-19 virus.

Comex silver dropped below the support level of $22.8 mentioned last month. This is a sign of weakness and could push the price lower to the next support at $20.5-21. A fall below $20.5 could impart further weakness. The short-term outlook negative unless the price moves above $25.50.

The MCX gold price has been consolidating in a range and the price has to move either above ₹48,650 or drop below ₹47,000 to trigger a significant directional move. Until either of these levels is breached, expect volatile and range-bound action to persist. Above ₹48,650, expect a rise to ₹50,500-51,000. Below ₹47,000, MCX gold could slide to ₹46,000-46,500.

The short-term outlook for MCX silver is not positive; a fall below ₹₹58,300 could trigger a sharp fall in price. Unless the price moves above ₹65,000, expect silver price to remain weak. Below ₹58,300, the price could drop further to the ₹54,300-55,100 range.

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

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