Gold prices may continue to fluctuate in the coming days, influenced by global economic indicators and market sentiment. Praveen Singh, a Senior Fundamental Research Analyst at Mirae Asset Sharekhan, suggests that investors consider a strategy of buying on dips. This is because, despite recent volatility, gold remains a well-supported asset due to various factors. The following analysis provides an in-depth look at the factors affecting gold prices and the outlook for the precious metal.
Gold Performance and Market Uncertainty:
Gold experienced a significant decline of 2.64% in the last two trading days of the week ending November 14, primarily due to uncertainty surrounding the Federal Reserve's (Fed) rate cut decision. However, it managed to close the week with a nearly 2% gain at $4,084. The price surge to $4,245 on November 13 was driven by inflation concerns and the potential for a $2,000 tariff rebate for Americans earning less than $100,000 annually. Subsequently, a sell-off occurred as Fed officials opposed a December rate cut, and the government shutdown added to the uncertainty.
At the time of writing, gold prices were trading at $4,080, a 0.1% decrease for the day, as investors adopted a cautious stance ahead of a flood of US economic data. The MCX December gold contract was down 0.44% at Rs 123,022.
Economic Data and Geopolitical Tensions:
Several economic indicators have been released, providing insights into the global economy. The US Empire manufacturing index for November, released on November 17, exceeded expectations at 18.70, while construction spending for August beat estimates at 0.2%. On the other hand, China's retail sales for October rose 2.9%, surpassing the forecast, but industrial production fell short at 4.9% year-over-year.
Geopolitical tensions between China and Japan have intensified due to Japan's Prime Minister Sanae Takaichi's statement regarding potential military action in a Taiwan conflict. This has raised concerns about the region's stability, which could impact global markets.
US Dollar Index and Interest Rates:
The US Dollar Index was trading at 99.45, a 0.15% increase for the day. US yields for 2-year and 10-year bonds were steady at 4.61% and 4.12%, respectively, with the latter experiencing a 0.50% decrease.
Gold ETF and COMEX Inventory:
Global gold ETF holdings stood at 97.39 million ounces (MOz) as of November 14, a slight increase of 0.15 MOz for the week but down from the cycle peak of 98.94 MOz on October 21. Despite this, gold ETF holdings have increased by 17.54% year-to-date, reaching a near 3-year high of 452 tons.
COMEX gold-eligible inventory was at 17.90 MOz as of November 14, a 2% decrease from the cycle peak of 22.45 MOz in April, as investors took delivery of gold.
Fedspeak and Rate Cut Speculation:
Fed officials have expressed differing views on rate cuts. While some, like Vice Chair Philip Jefferson, highlight increased downside risks to employment, others, such as Federal Reserve Bank of Kansas City President Schmid and Federal Reserve Bank of St Louis President Musalem, oppose December rate cuts due to elevated inflation. Federal Reserve Bank of San Francisco President Mary Daly suggests it's premature to decide on rate cuts, and Minneapolis Fed President Kashkari believes current inflation levels are too high.
Upcoming Data and Market Focus:
Several critical economic reports are scheduled for release, including ADP weekly employment estimates, import and export price indices, industrial production, NAHB housing market index, TIC flows, housing starts, FOMC meeting minutes, nonfarm payroll, weekly jobs, leading index, and existing home sales. The market will also closely monitor Eurozone and UK CPI and PMI data.
National Economic Director Kevin Hassett noted that the October job report will exclude the unemployment rate due to incomplete household surveys, and the October CPI report is unlikely to be released. This makes the Fed's decision at the December 9-10 FOMC meeting particularly challenging.
Outlook and Gold Trading Strategy:
China-Japan tensions and disappointing Chinese economic data, especially in the property sector, are expected to support gold prices. The focus will be on US tech earnings and the September nonfarm payroll report. The probability of a December Fed rate cut has decreased to 41%, a bearish factor for gold.
Gold is anticipated to range trade ahead of tech earnings and the payroll report, with rate cut probabilities subject to change based on US data and comments from the administration and Fed officials. Buying on dips remains a recommended strategy, as December rate cuts are still a possibility, and gold is well-supported by various factors.
Support and Resistance Levels:
Gold support levels are identified at $4,050, $4,000, and $3,936, while resistance levels are set at $4,160, $4,200, and $4,260.
Silver Market Analysis:
Silver prices experienced a sharp rise, testing the strong resistance level around $55 for the second time during the week ending November 14. However, rate cut uncertainty caused a nearly 7% decline. Despite this correction, silver ended the week with a 4.67% gain at $50.58.
Spot silver was trading at $50.91, a 0.6% increase for the day. Global silver ETF holdings increased by approximately 6 million ounces (MOz) or 187 tons last week, indicating positive sentiment for the metal.
Improved risk appetite, driven by encouraging tech earnings, may further support silver prices. Silver support levels are noted at $50, $49.30, and $47.50, while resistance levels are at $52.30 and $55.
Disclaimer: The views and recommendations provided by experts on stock markets, asset classes, and personal finance management are their personal opinions. These views do not necessarily reflect the perspectives of The Times of India.
