Chinmaya IAS Academy – Current Affairs Chinmaya IAS Academy – Current Affairs
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After a strong uptrend in June, the prices of gold and silver in the international market remained largely range-bound in July. Though the precious metals managed to eke out marginal gains on a month-on-month basis, the strength in the U.S. dollar arrested the scope for significant gains.
Comex gold futures edged up 1.7% in July to settle at $1,437.8 an ounce. Silver, on the other hand, recorded a more robust gain of 7.5% in July, to close at $16.4 an ounce. While the expectations of an interest rate cut in the U.S. was the primary driving force of the rally in precious metals in June, the announcement of the rate cut triggered a cool-off in gold and silver prices.
Gold slipped to a two-week low on August 1, a day after the U.S. Federal Reserve cut interest rates for the first time in a decade. Precious metals staged a modest recovery on August 1 after the U.S. President said he would impose an additional 10% tariff on $300 billion worth of Chinese imports on September 1.
In the domestic market, the price of gold futures at MCX gained about 3% in July to close at Rs. 35,419 per 10 grams. MCX silver futures settled at Rs. 41,227 per kilogramme by the end of July. The short-term outlook for international prices of gold and silver hinges on what the price does over the next few days. Comex gold has a support zone at $1,400-1,410 and resistance at $1,460-1,470 an ounce. A breakout through either of these levels is likely to trigger a move in the direction of the breakout.
A move past the resistance at $1,470 would impart a positive trend and could push gold price to the immediate target of $1,495-1,505 an ounce. A breach of the support at $1,410 could impart short-term weakness and trigger a slide to $1,370-1,380 range. The short-term outlook for silver is slightly negative. A fall to the immediate target of $15.5-$15.75 appears likely.
The negative view for silver would be invalidated if the price moves past the resistance at $16.9. A breakout past $17 would help the price move towards the major target of $17.8-18. Until $16.9 is not taken out, there would be a case for a slide to $15.75.
Domestically, the outlook for gold is positive while silver is likely to remain range bound. The gold price at MCX is likely to rise to the immediate target of Rs. 36,800-37,000 per 10-grams. A fall below Rs. 33,500-33,800 zone would invalidate the short-term positive outlook for gold. To summarise, the short-term outlook for precious metals is not too bullish. Rangebound action can persist until there is fresh breakout above resistance levels. The medium-term however remains positive.
(The author is a Chennai based analyst / trader. The views and opinions featured in this column is based on the analysis of short-term price movements in gold and silver futures at COMEX and Multi Commodity Exchange of India. This is not meant to be trading or investment advice.)
