Comex gold price is still moving in a tight range, indicating a contraction in volatility.
After a moderation in the early part of December, both gold and silver managed to gain in the second half. The precious metals however lost their sheen in the year 2021, with Comex Gold registering its worst annual performance since 2015.
Going forward, volatility in US bond yields along with news flows about the spread of COVID-19 will play a significant role in influencing the prices of the precious metals.
Comex gold closed at $1,828.6 an ounce, up 2.9% at the end of December. Comex silver was up 2.3% at $23.35 an ounce.
In the domestic market, MCX gold futures closed 0.6% higher at Rs 48,099 per 10 grams. MCX silver futures also ended marginally higher at Rs 62,660 per kg.
Comex gold price is still moving in a tight range, indicating a contraction in volatility. Such contraction is a harbinger of sharp fluctuations in prices. A drop above $1,880 or below $1,720 will set the tone for the next big move in Comex Gold.
Unless any of these levels are breached, expect wild swings based on news flow regarding the US Federal Reserve’s bond purchases and the spread of COVID-19. It would be appropriate to discuss short-term goals in case either of the above two levels is breached.
Comex silver almost tested the $20.5-21 target area mentioned last month. After falling to a low of $21.45, the price corrected in late December.
Price volatility over the past few weeks indicated a short-term strength in Comex silver. The price is likely to move towards an immediate target of $24.5-25. This view will be invalidated if the price closes below $21.
In line with the global trend, gold prices on MCX also remained in a limited trading range. Either a move above ₹48,500 or a decline below ₹47,000 will set the tone for the next important directional move. As long as none of these levels are breached, volatile and range-bound price action is expected to continue.
Above ₹48,650, expected to move up to ₹50,500-51,000. Below ₹47,000, MCX Gold may slip towards ₹46,000-46,500.
Silver price on MCX is also consolidating in a limited range. The short term trend will depend on either a move above ₹63,500 or a decline below ₹58,300. It would be premature to predict the direction of the breakout and it would be prudent to wait for the price to show intent.
In short, the precious metals are consolidating in a narrow range. Although a big directional move is just around the corner, it would be prudent to wait for confirmation from price action. Till then, it would be advisable to stay light and avoid major risks in precious metals.
(The author is a Chennai-based analyst/trader. Not meant to be trading or investment advice)
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