The weakness in the U.S. dollar and inflation concerns helped Comex gold close near a 5-month high on May 28.
Comex gold gained 7.8% in May to close at $1,905.3 an ounce. Comex silver, too, closed on a positive note, clocking a gain of 8.3% to settle at $28.02 an ounce.
Mirroring the global trend, MCX gold futures gained 4.9% to close at ₹49,349 per 10-gm. MCX silver futures gained 5.2% to settle at ₹71,898 per kg.
Comex gold price moved well past the target of $1,865-1,880 mentioned last month. The price could be confined to a trading range as the recent rally has pushed the price into a short-term, overbought region. A move past $1,925 would indicate that the move to $1,950-1,960 is underway. To summarise, the medium-term outlook for precious metals remains positive.
Bullion prices had started 2021 on a weaker note witnessing the much-needed correction of the previous rally. Market fundamentals are varying now with the focus shifting from pandemic worries towards central bank policy actions which may keep investors on edge for the second half of the year to gauge the price trend.
The precious metals broke the consolidation range in April 2021 as global central banks warned of higher inflation with booming commodity prices and loose monetary policy. The traders and investors rush to hedge their portfolios against inflation worries boosting buying in gold and silver.
Gold prices showed rare parity with bond yields in mid-May rallying against inflation bets. The US 10-year breakeven rate, which measures the gap between 10-year Treasury bonds and Treasury Inflation-Protected Securities (TIPS), has risen to 2.43 per cent, indicating higher inflation expectations. The Federal Reserve has termed the current spike in inflation as transitory while floating talks of taming asset purchase in minutes kept investors vary to ride on gold bulls.
Silver has outperformed gold so far in 2021 amid a strong demand outlook for industrial metals. The easing of lockdown measures and reopening of economic activities have boosted buying in industrial metals. The gold/silver ratio has declined to 68 from the record levels of 130, showing clear dominance for silver from investors. Strong Chinese data and the US President's infrastructure bill focusing on green technologies have paved the way for the rally in silver. Higher demand from products like solar panels and the auto industry has set a long-term outlook bullish for silver.