Precious metals in consolidation mode

After a sharp rally in July, precious metals remained largely range bound in August. The upside momentum in July spilled over to the early part of August with comex gold spiking to all-time highs on August 4, before cooling off. The prices have since been consolidating in a trading range.

Comex gold closed 0.4% lower in August to settle at $1,978.6 an ounce. The price action in comex silver was more exciting with the metal gaining 16.6% to settle at $28.2 an ounce.

In the domestic market, MCX gold futures closed 3.3% lower to settle at ₹51,701 per 10 gm. MCX silver futures closed 3.6% higher to settle at ₹67,318 a kg.

Comex gold surged past the target zone of $2,020-2,030. The sharp rally in July has pushed the price of Comex gold into an overbought territory resulting in a cool-off or reversion to mean. This phase is likely to persist in the short-term.

Comex gold may consolidate in the $1,910-$2,025 zone for a while. The expectation is a breakout to the upside. A move past $2,030 would be a positive sign and may propel prices to the next major target of $2,100.

Comex silver, too, achieved the target zone of $25.75-26 and has since been consolidating. It is likely to be confined to the $25.5-28.8 range in the short term. A move above $29.5 would be a sign of strength and trigger a rally to the next target of $31-$32. After moving past the target of ₹55,200-₹55,500, MCX gold has been consolidating in a range recently. While the long-term trend is positive, a range-bound price action in the ₹49,500-₹54,500 range is likely in the short term. A move above ₹55,000 per 10 gm would signal the resumption of the long-term uptrend.

Price action in MCX silver was similar to MCX gold. After moving past the earlier mentioned target of ₹68,500-₹69,000, the price has eased into consolidation in August. It is likely to be confined to the range of ₹64,000-₹70,000 in the near term. A breakout above ₹70,500 may indicate resumption of the uptrend.

To summarise, precious metals have been in consolidation mode, which is likely to sustain in the short term. The short-term trend would remain positive until the price breaches the lower end of the trading range mentioned above.

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

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