Weak U.S. dollar, Fed rate-cut hope boost gold, silver

After a few months of lull, precious metals regained sheen last month. Both gold and silver recorded impressive gains, especially in the latter half of August.

The weakening of the U.S. dollar along with expectations of a further interest rate cut by the U.S. Federal Reserve played a key role in bolstering sentiment towards precious metals.

Comex gold gains

Comex gold gained 5.2% in August and closed at $3,516.1. The performance of Comex silver was even more impressive with the white metal gaining 10.76% to settle at $40.75 by the end of August.

Mirroring the trend in the global markets, MCX Gold price closed 5.06% higher to settle well above the psychological ₹1,00,000 mark at ₹1,03,780 per 10-gram. MCX silver recorded a 8.95% gain in August to settle at ₹1,21,702 per kilogram.

As observed in the last few months, the Comex gold price resumed its uptrend on the breakout of the upper end of the prior range at $3,450. A move past this level triggered momentum to the uptrend, pushing the gold price to fresh all-time highs. The short-term outlook is positive and Comex gold price could head to the next target of $3,680-3,720 range. This positive outlook would be invalidated only if the gold price slips below the support zone at $3,350-$3,370.

Comex silver has displayed relative out-performance versus gold in the past few months, and this persisted in August too. As observed last month, the silver price cooled off a wee bit in August before taking off again.

The breakout above the key resistance at $38.5 imparted momentum to the upside and helped silver price scale fresh 52-week high of $40.75. The short-term outlook remains positive for Comex silver, and the price could head to the next upside target of $43.5-44.5. A close below $35.5 would invalidate the positive outlook.

The uptrend in the international price had a positive rub-off on MCX gold. The MCX gold price managed to breakout above the key resistance level of ₹1,02,000 which is a positive sign. The price could head to the next target zone of ₹1,10,000-₹1,12,000.

Only a breach of the support level at ₹96,500 would invalidate the positive outlook for MCX gold.

Contrary to expectations, MCX silver staged a sharp recovery last month and managed to scale a fresh 52-week high towards the end of August. The silver price could seek higher levels in the short term. A move to ₹1,30,700 -₹1,31,500 appears likely. The positive outlook would be under threat if the price falls below ₹1,11,000.

To summarise, both gold and silver appear to have resumed their uptrend and could seek higher levels in the short term.

(The author is a Chennai based analyst/trader. The views and opinion featured in this column is based on the analysis of short-term price movement in gold and silver futures at COMEX & Multi Commodity Exchange of India. This is not meant to be a trading or investment advice.)