Gold Forecast: Gold prices held firm after a rally witnessed in the past few sessions, hovering near two-week high, helped by a subdued dollar, while investors awaited U.S. inflation data that could provide cues on the Federal Reserve’s interest rate hike path.
As the Dollar index and U.S. Yields witnessed pressure in the earlier session and a rally was witnessed in the both gold and silver prices. Although some profit booking could be on cards after a much awaited upside by market participants. According to the CME fed watch tool there is a 90% probability for one more 75bps rate hike to combat inflation. Germany’s economy, Europe’s largest, will contract next year as a dramatic rise in energy costs due to the war in Ukraine extinguishes the chances of recovery after pandemic-related lockdowns, the Ifo institute said. Focus today will be on U.S. consumer price data, where the expectation is that headline inflation could rise by 8.1% YoY in August versus 8.5% in July.
Gold had recovered somewhat after both US Treasury securities and the Dollar index softened from $110.23 to $108.18 in a couple of trading sessions. Today’s US CPI will guide gold movement further although 75bps rate hike on 21st sept is already factored in by the market. Until now hedge funds had increased their long positions in USD and profit taking was due which would short squeeze precious metals and that is what is happening right now where silver market rallied 6% at the start of the week as there were heavy shorts in that counter (bearish bets was at 3 year high).
Nothing has changed fundamentally and the global backdrop continues to favor the dollar and U.S. assets in general. We believe any confirmed trend will only emerge after the US Fed meet where the Fed will give further ideas about raising interest rates. In MCX 50780 is proving to be strong resistance as since past three trading sessions, gold has reversed from that zone. So go long only above that level.
Gold prices held steady on Tuesday with spot gold prices at COMEX were trading near $1724 per ounce in the morning trade. MCX Gold October futures opened lower near Rs. 50400 following stronger rupee. Gold prices are trading firm supported by a weaker dollar as market players are awaiting key US CPI data. We expect gold prices to trade sideways to up for the day with COMEX Spot gold support at $1707 and resistance at $1745 per ounce. MCX Gold October support lies at Rs. 50100 and resistance at Rs. 50945 per 10 gram.
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