Comex gold and silver recorded the biggest monthly fall since February and have closed near six-month lows. The strengthening of the U.S. dollar along with the hardening of the U.S. treasury yields played a key role in keeping the prices subdued.

As a result, Comex gold closed 5.1% lower at $1,866.1 at the end of September. Comex silver saw a steeper cut of 9.5% to settle at $22.45 an ounce. Mirroring global markets, MCX gold closed on a negative note at ₹57,600, a fall of 3.7% in September. MCX silver saw a cut of 7.7% to ₹69,587 a kg.

The fall in the price of Comex gold resulted in a breach of the lower end of the prior range at $1,910-2,010. As anticipated, this resulted in weakness and the gold price headed closer to the then-mentioned target zone of $1,850-1,860. The short-term trend is weak, and the price may drop to the lower end of the target zone at $1,850.

Oversold zone

The recent fall has pushed the Comex gold price to an oversold zone and a mean-reversion move up is possible. After the completion of a brief upward move, Comex gold is likely to resume downtrend. Only a move past $1,960 would invalidate the negative outlook.

Though Comex silver too ruled weak, unlike gold, it did not breach the lower end of $22.5-25.5 range. As observed in August, a breakout from this range would set the tone for the next major move in silver. A move past $25.7 would be a sign of strength and the price could head to the upside target of $26.8-27.5. A fall below $22.3 could trigger a slide to $21-21.2.

Mirroring the global trend, MCX gold remained weak. The short-term outlook is negative, and the price may slide to the target of ₹57,150-57,300. MCX gold has to move above ₹59,960 to invalidate the weak outlook.

MCX silver is still confined to the prior range of ₹69,500-78,500. The recent price action suggests the price could break the lower end of the range and slide to the target zone of ₹64,500-65,000. A move past ₹73,750 would invalidate the negative outlook.

To summarise, the precious metals have either broken the lower end of the range or on the verge of doing so, suggesting weakness. While a short-term bounce is a possibility, the overall trend remains weak until the price crosses the invalidation level mentioned above.

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

Related Topics
comment COMMENT NOW