Comex gold sees selling pressure near resistance of $1987; Silver may move in a broader range of $23

Comex gold sees selling pressure near resistance of $1987; Silver may move in a broader range of $23.65-25.8

By Saumil Gandhi

In the previous week, the yellow metal has wiped out its earlier gains as the dollar index rebounds from multi-month lows. For the week, the dollar index surged more than 1.0%, while Comex silver registered its first weekly decline since June 26. In the energy pack, crude oil continued to rise and recorded its fourth straight weekly increase on the back of tight supply. On the other side, Natural gas closed in green for the first time in the current month on a weekly basis, which was mainly supported by an improved demand outlook. While base metals have lost their shine on account of lower-than-expected Chinese GDP numbers and a rise in LME inventories in Zinc and copper, which have closed lower by 2.75% and 2.55%, respectively.

Comex Silver was not able to hold above the $25.0 psychological mark and closed around the $24.61 level with a loss of 1.35% on a weekly basis. The MCX Silver September contract settled down by 1.31% at Rs 74,970. As we are moving towards monthly closing, looking at the long-term chart, Comex Silver faces resistance around its long-term trendline level at $25.80, and it’s hard to cross above it this week. Overall, we believe silver prices could move in a broader range of $23.65 to $25.80.

We believe this week will remain the busiest week for investors as a series of important macro-events unfold, such as U.S. consumer confidence data, US Federal Reserve policy outcome, ECB interest rate decision, Bank of Japan interest rate decision, and US GDP numbers. Investors have already discounted a 25-basis point hike by the FOMC at the conclusion of its July meeting on Wednesday, so the focus will be on forward guidance. Precious metals are likely to witness high volatility this week.

Gold: Technical Outlook

From a technical perspective, Comex gold could move in a broader range of $1987 to $1925 per ounce. A move above the $1987 level (50 percent Fib retracement zone) will open upside for the target of $2022. The MCX Gold August future is expected to move in the range of Rs 58,750 to Rs 60,180.

(Saumil Gandhi, Senior Analyst (Commodities), HDFC Securities. Views expressed are the author’s own. Please consult your financial advisor before investing.)