Gold prices slipped one per cent to their lowest level in more than two weeks on Wednesday, June 27, weighed down by a stronger dollar and higher bond yields, while traders looked forward to US inflation data due later this week.
Spot gold last fell 0.9 per cent to $2,299.40 per ounce, hitting its lowest since June 10. US gold futures also fell 0.8 per cent to $2,311.30, according to Reuters. Spot silver fell 0.5 per cent to $28.79, palladium lost 2.8 per cent to $921.75, while platinum climbed 1.7 per cent to $998.75. Back home, gold futures last traded 0.03 per cent higher at ₹71,110 per 10 grams on the multi commodity exchange (MCX).
Gold hits 2-week low: What’s weighing on the yellow metal?
-The bullion is very well be responding to the firmer US dollar and analysts continued to price in the possibility that the US Federal Reserve is unlikely to move (interest rates) earlier in the summer.
-The US dollar rose 0.4 per cent to a near two-month peak against its rivals, making gold more expensive for other currency holders, while benchmark US 10-year yields hit a near two-week high.
-This week the focus will be on the US personal consumption expenditures (PCE) price index, the US Fed’s preferred inflation gauge, that could shed more light on the US interest rate path. Higher interest rates increase the opportunity cost of holding non-yielding bullion.
-Data out on Tuesday showed US consumer confidence eased in June amid worries about the economic outlook, but households remained upbeat about the labor market and expected inflation to moderate over the next year.
-Fed Governor Michelle Bowman reiterated her view that holding the policy rate steady “for some time” will probably be enough to bring inflation under control, but also repeated her willingness to raise borrowing costs if needed.
Where is gold headed?
Gold futures are stuck in a range despite high volatility seen in the commodities basket, as traders look ahead to US GDP numbers on Thursday and crucial PCE inflation data, which may give some indications on the rate cut path of the US Federal Reserve. The Fed fund futures are still pricing in more than a 65 per cent chance of rate cut in September, according to Pranav Mer, Vice President, EBG – Commodity & Currency Research, JM Financial Services Ltd.
Gold and silver prices are struggling to find any momentum, according to most analysts. Gold remains sidelined as silver is unable to hold its 50-day moving average, as per Rahul Kalantri, VP Commodities, Mehta Equities Ltd.
‘’Gold continues to trade within a tightening range between $2,300 and $2,350 an ounce, while silver has significantly underperformed its sister metal. Both metals are expected to remain range-bound as traders hesitate to take significant positions ahead of Friday,” said Kalantri.
On Tuesday, Comex gold prices declined as hawkish Fed statements boosted the greenback and weighed on market sentiments. ”Fed Governor Michelle Bowman said she sees a number of upside risks to inflation, and reiterated the need to keep borrowing costs elevated for some time. Heightened geo-political tensions and prospects of an Israeli invasion of the southern Lebanon provided some cushion,” said Kaynat Chainwala, AVP-Commodity Research, Kotak Securities.
Technical View:
Gold has support at $2,296-$2,278 and resistance at $2,332-$2,350. Silver has support at $28.58-$28.40 and resistance at $29.05-$29.30, according to Mehta Equities’ Rahul Kalantri. In INR terms, gold has support at ₹71,110- ₹70,880 and resistance at ₹71,790- ₹71,910. Silver has support at ₹86,340- ₹85,880 and resistance at ₹87,720- ₹88,500, according to Kalantri.
“On charts, gold holds strong support at 71,020/ 70,740, while on the upside resistance holds at 71,760/ 71,930.” said JM Financial Services’ Pranav Mer.
“Gold prices remained range-bound between 71,375-71,450, supported by base levels in Comex Gold. The trend appears weak due to recent closing levels and pressure from the dollar index, which has risen above 105.50, according to Jateen Trivedi, VP Research Analyst – Commodity and Currency, LKP Securities. The expected range for Gold is between 70,850-72,100, as per Trivedi.
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