Gold price hits two month low on soaring US dollar rates. Buy or wait?
Gold rate today: Despite risk prevailing in the global financial market, gold failed to emerge as ‘investors’ haven’ and nosedived to two month low. Spot gold price even breached its crucial support of $1,880 per ounce levels and ended at $1,848 levels on Friday. Gold future contract for October 2023 expiry on Multi Commodity Exchange (MCX) ended at ₹57,096 per 10 gm levels.
According to commodity market experts, relentless surge in the US dollar rates has put pressure on the precious metal. They said that international gold price has now major support at $1,810 to $1,800 per ounce levels whereas on MCX, immediate support for the precious metal is at ₹57,000 whereas major support has now shifted towards ₹56,100 per 10 gm zone.
Why gold prices are under pressure?
Highlighting the reason for falling gold prices, Sugandha Sachdeva, Executive Director & Chief Strategist at Acme Investment Advisors said, “A relentless surge in the dollar index towards a 10-month high, driven by growing concerns over persistently high interest rates in the US, exerted downward pressure on gold prices. Prices even pierced the critical support level of $1,880 per ounce and drifted lower. Surprisingly, gold failed to attract safe-haven demand even amidst a climate of risk aversion prevailing in the financial markets.”
However, Sugandha said that towards the week’s conclusion, there was a brief resurgence in gold prices, sparked by the release of key Personal Consumption Expenditures (PCE) data, which suggested a moderation in inflationary pressures. In August, the Fed’s favored inflation gauge rose by 3.9 per cent, down from the 4.4 per cent reading in July.
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“Moreover, on a monthly basis, it increased by a modest 0.4 per cent, aligning with market expectations which raised hopes that the US Fed might hold rates steady at the November meeting. However, the recovery in prices was short-lived, as the precious metal faced renewed supply pressure. Not even concerns regarding the potential US government shutdown, stemming from a lack of consensus among lawmakers over a new spending bill, could provide sustained support for gold,” she added.
US shutdown in focus
On immediate triggers that may fuel gold price rebound in near term, Anuj Gupta, Head — Commodity & Currency at HDFC Securities said, “One needs to remain vigilant about the US shutdown news. Market is expecting a partial US shutdown on 1st October 2023. If that happens, then the resurgence in the gold price witnessed on the weekened may extend further.”
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Anuj Gupta of HDFC Securities said that ongoing real estate concern in China may also support gold prices as investors are expected to shift money from real estate to other safe havens, including gold.
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However, in case of US government managing to avert shutdown, Anuj Gupta of HDFC Securities said that in that case there can be more downside possible in the yellow metal price and ideal strategy for gold investors would be ‘sell on rise’ in that condition.
Gold price outlook
“Regarding the gold price outlook, it appears that the yellow metal may experience further weakness before staging a recovery. Gold prices could find their next support in the $1,810 to $1,800 per ounce range, from where a rebound is likely. However, only a closing above $1,880 per ounce would set it on the path of upward momentum. At the domestic market, the level of ₹57,000 per 10 gm is still working as a key support but a closing below this threshold could pave the way for further downside towards ₹56,100 per 10 gm mark.”
On suggestion to gold investors in current market scenario, Sugandha Sachdeva said, “As the gold market continues to navigate the crosscurrents of economic data and monetary policy, it would be prudent to carefully monitor the evolving landscape and wait for some consolidation before making any significant investment decision.”
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.
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Updated: 30 Sep 2023, 07:29 AM IST
