MCX Gold, Silver crash up to 44% from record highs; is the rally over?

At current levels, MCX Gold prices have retraced up to 38.2 per cent, and Silver up to 50 per cent, highlights Aamir Makda Commodity & Currency Analyst of Choice Broking.

MCX Gold, MCX Silver prices today

MCX Gold and MCX Silver prices have witnessed a sharp decline in the last three trading sessions, and seen trading below the short-term moving averages at current levels. In fact, MCX Gold prices are seen testing the 50-day moving average (50-DMA) for the first time in over six months.  MCX Gold prices have tumbled up to 24.7 per cent from a high of ₹1,80,799 hit on Thursday, January 29, to a low of ₹1,36,185 hit on Sunday in the Budget Day special trading session.  Meanwhile, MCX Silver rates plunged as much as 44.4 per cent from a record high of ₹4,20,048 to a low of ₹2,33,774 hit in today's trading session.  On Monday, as of 12:20 PM, MCX Gold April futures traded with a loss of 6 per cent at ₹1,38,888 levels. MCX Silver March futures crashed 12 per cent or ₹11,853 to ₹2,33,800 levels.  Despite the sharp fall, analysts remain bullish on the long-term prospects on Gold and Silver prices.  Apurva Sheth, Head of Market Perspectives and Research at SAMCO Securities remains bullish on precious metals over the long-term and considers the recent fall as a pause rather than reversal.  "From a price action perspective, the larger trend in Gold remains clearly intact. The long term structure continues to show higher-highs and higher-lows, and the recent decline looks more like a pause within an on-going uptrend rather than the start of a reversal," says Apurva Sheth. 

 

 

  Having said that, the analyst expects MCX Gold prices to consolidate over the next few months.  "Gold may spend the next few months moving within a broad range, capped near ₹1,80,779 and supported around ₹1,36,185 and ₹1,32,294 levels. Such ranges are common after sharp advances, allowing excess optimism to cool off and positioning to reset, without damaging the underlying trend. Importantly, prior breakout zones are holding, suggesting that strong hands are still willing to accumulate on dips," says Sheth.  ALSO READ | Silver, Gold ETF rout deepens as metals' historic plunge continues 

What is the downside risk for MCX Gold, Silver rates?

Aamir Makda of Choice Broking highlights that Gold and Silver prices have retraced up to 38.2 per cent and 50 per cent amid the current fall.  "In terms of price retracements, Gold prices were quoting near 38.2 per cent Fibonacci retracement (₹1,37,729) levels. If the fall continues, Gold could correct up to 50 per cent and 61.8 per cent retracements at ₹1,24,400 and ₹1,11,080 levels, respectively," says Aamir Makda, Commodity & Currency Analyst of Choice Broking.  In case of Silver, prices have retraced up to 50 per cent of the preceding 377 per cent rally, highlights Makda. The analyst says that since Silver had outrun Gold on its way up, prices have taken a sharp beating on its way down as well.  Makda expects MCX Silver prices to seek support around the 61.8 per cent Fibonacci retracement, which stands at around ₹2,14,800 levels.  In case of a pullback, the analyst expects MCX Gold and Silver prices to face resistance around ₹1,54,00 and ₹2,90,000 levels, respectively.  Disclaimer: The views expressed by the brokerage/ analyst in this article are their own and not those of the website or its management. Business Standard advises users to check with certified experts before taking any investment decisions.