Positive outlook on gold amid correction

Hyderabad: Bullion prices hovering in a correction mode in last week as rising dollar index and profit booking following a strong bullish rally in March influenced gold and silver prices. However, after this correction, the overall outlook for gold remains positive, observe bullion analysts as they expect moderate volatility and further correction in the near term. The precious metal touched all-time high of Rs67,450 per 10 grams on March 21.

“Gold recorded its fourth weekly gain in five, propelled by projections of rate cuts from the US Federal Reserve for the year, which bolstered investor confidence. Despite the Fed maintaining steady rates, policymakers signaled their intention to reduce rates by three-quarters of a percentage point by the end of 2024, notwithstanding recent spikes in inflation. Fed Chair Jerome Powell emphasized that the elevated inflation figures did not alter the broader narrative of gradually alleviating US price pressures,” Ravinder Kumar, senior research analyst (commodities) at SMC Global Securities Ltd, told Bizz Buzz.

Spot gold at Comex was trading at $2,167 per ounce, down $35 from the previous day’s level, in the overseas markets. Gold prices are down nearly two per cent from their all-time hit on Thursday (March 21). Key factors such as profit-booking, long liquidation, and a sharp rebound in the dollar index, etc., weighed on the yellow metal. Further, events like rate cuts by the Swiss National Bank, better than expected PMI and housing data from the US influenced the bullion market.

“Given gold’s lack of interest yield, it typically thrives when interest rates decline, diminishing the opportunity cost of holding the precious metal. Fed funds futures traders are now pricing in a 74 per cent likelihood of rate cuts commencing in June, as per the CME Group’s Fed Watch Tool. Meanwhile, the Bank of England opted to leave borrowing costs unchanged and hinted at a potential shift towards rate cuts as the economy moves in that direction,” added Kumar. On last Friday yellow metal tumbled Rs875 to Rs66,575 per 10 grams amid weak trends in global markets. Silver also fell by Rs760 to Rs76,990 per kg against the previous close of Rs 77,750 per kg.

“Unexpectedly positive data emerged on Thursday, with a decline in new claims for unemployment benefits in the US and a significant uptick in sales of previously owned homes in February. However, the dollar rebounded following a surprise interest rate cut by the Swiss National Bank, boosting global risk sentiment and reinforcing the allure of the greenback amidst robust US economic expansion,” remarked Kumar.

Last week, Silver was also trading lower at $24.45 per ounce. It closed at $25.51 per ounce on March 21. Comex spot gold has support at $2,145/2,130 and resistance at $2,178/2,206 per ounce.

“Gold spot on COMEX retreated after reaching an all-time high of $2,222.91/oz, with this level now acting as resistance. Support levels lie at 2,140 and 2,090. Silver prices on COMEX may fluctuate within the broader range of $22.60-$26. Looking ahead, gold prices on MCX are anticipated to experience significant volatility, finding support near Rs64,500/10gm and encountering resistance near Rs67,000. Silver may trade within the range of Rs73,800-77,000/kg,” stated Kumar.