Gold recovered slightly from its five-month lows on Friday as the dollar and bond yields declined. However, bullion was still heading for another weekly fall since upbeat US data reinforced hopes that the Federal Reserve will continue raising interest rates. Spot gold on Thursday hit a five-month low of $1884 due to positive US economic data.
Spot gold was unchanged at $1,887.79 per ounce on Friday at 2:22 p.m. ET (1822 GMT), down 1.4% for the week. Reuters reports that US gold futures ended the day 0.1% higher at $1,916.5. Due to the dollar’s 0.2% decline, which limited losses for the day, gold became more affordable for holders of other currencies.
On Friday, when the US dollar slid from its highs, gold prices in India rose on the Multi Commodity Exchange (MCX), following rise in global prices.
Gold futures for October delivery closed ₹88 or 0.15% higher to ₹58,378 per 10 grams as against the previous close of ₹58,290 and the opening price of ₹58,370 on the MCX.
According to Sugandha Sachdeva, Executive Director & Chief Strategist at Acme Investment Advisors,the yellow metal may consolidate for a while, as it has breached the key $1900 per ounce mark but has crucial support at $1880 and then $1865 per ounce, or ₹57500 per 10 gm mark, and is likely to garner buying interest at lower levels. For the next week, markets’ attention is turning towards the upcoming speech by the Fed Chair at the Jackson Hole Symposium. This event could provide clarity on the central bank’s stance and potential rate hikes, which in turn could influence market sentiment. Positive indications could help stabilize gold prices.
Should you buy or sell?
Anuj Gupta, Head of Commodity and Currency Research at HDFC Securities
According to Gupta, gold prices are under pressure as US dollar has been climbing in US Fed rate hike buzz. In current circumstances, the yellow metal has hit five months low while the US greenback has climbed to nine week high.
“But, we are expecting bounce back in precious metal as it has touched oversold zone. In international market gold rates on Friday has strong support at $1860 levels. If it sustains above $1900 and closes above $1910 levels then we can expect rebound in the yellow metal. On MCX, gold prices have immediate support at ₹58,000 per 10 GM levels whereas it has strong support at ₹57,500 levels. On higher side, gold has immediate resistance at ₹58,700 and ₹59,200 levels,” added Gupta.
Sugandha Sachdeva, Executive Director & Chief Strategist at Acme Investment Advisors
According to Sachdeva, gold prices slipped to the lowest level since March in the international markets, witnessing a third consecutive week of losses, while in the domestic markets, prices dropped for the second consecutive week. This weakness can be attributed to the strength seen in the dollar index, wherein it logged gains for the fifth consecutive week and raced to a two-month high while dimming the appeal of safe-haven gold. Concerns about borrowing costs remaining elevated for longer amid a resilient US economy have boosted the greenback. The hawkish Fed minutes of the last meeting released during the week indicated the US central bank is still focused on fighting inflation and raised bets for further monetary tightening in the US. This prompted a further rise in the dollar index and acted as a constraint on gold prices.
Even as China’s economy is cooling off significantly, gold has not attracted strong demand. The global gold ETF fund, SPDR, witnessed substantial outflows from its holdings during the week, indicating waning interest in gold as an investment.
“In the current scenario, even as investment demand is ebbing, central banks are expected to continue buying gold for the rest of the year, which will support its prices. Following three months of net selling, central banks reverted to becoming net buyers of gold in June. The recent turnaround of central banks becoming net buyers of gold indicates that governments still see value in including the precious metal as part of their foreign reserves. This trend can provide stability to gold prices and potentially limit further significant drops,” explained Sugandha.
Also Read: Gold rate today: Yellow metal gains as US dollar, yields retreat; may face resistance at ₹59,800 per 10 grams