In cooling-off mode

While the long-term outlook is positive, the price may drift lower in the near term.

After a period of consolidation, the prices of precious metals saw a cool-off in September. The firm trend in the U.S. dollar along with a recovery in the equity market affected market sentiment.

Comex gold closed 4.4% lower in September to settle at $1,890.9 an ounce. The fall in comex silver was dramatic with the metal losing 17.9% to settle at $23.3 an ounce.

In the domestic market, MCX gold futures closed 3.2% lower to ₹50,334 per 10 gm. MCX silver futures closed 14.9% lower to ₹59,919 per kg.

Comex gold ruled weak with prices slipping below the lower end of the prior trading range at $1,910-$2,025. While the long-term outlook for Comex gold remains positive, there are no signs of completion of the recent price cool-off. A move above $1,980 would indicate the resumption of the long-term uptrend.

Until $1,980 is taken out, the premise would be that the short-term cool-off phase is at play. Comex gold may slip to the immediate target range of $1,825-1,840 range in the short term. A move past $1,980 is required to invalidate this short-term weak outlook.

Comex silver, too, breached the prior support zone at $25.5 resulting in a slide to $21.2. The price has subsequently recovered in the past few trading sessions.

While the long-term outlook is positive, the price may drift lower in the near term. A fall below $23 would be a sign of weakness and could push silver price to $21-21.5 an ounce.

MCX gold has been consolidating in the ₹49,500-54,500 range. This trend may persist until the price gets past the ₹55,000 per 10 gm- level. A fall below ₹49,400 would impart weakness and price could then drift to the next target of ₹47,500-48,000. Until the price gets above ₹55,000, a slide to ₹48,000 would be the preferred short-term outlook.

MCX silver dropped below the lower end of the prior range at ₹64,000, resulting in a sharp crack thereafter.

The short-term trend is weak and a slide to ₹58,300 appears likely. The short-term trend could turn much weaker on a close below ₹57,500. Until price moves above ₹64,000, a slide to ₹58,300 would be the preferred view.

To summarise, precious metals are in a short-term downtrend while the long-term trend remains positive.

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

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