Gold price retraces from life-time high as US dollar retreats from one year low

According to commodity market experts, US dollar rate rebounded after the hawkish comments by one of the US Fed officials but they maintained that gold price closing above $2,000 levels in international market is a good sign. However, they maintained that further retreat in the US Dollar Index would put the precious yellow metal under pressure. They went on to add that gold price has cushion placed at $1,980 and $1,945 levels in international market whereas on MCX, yellow metal is likely to find cushion at ₹59,700 per 10 gm and then ₹58,500 per 10 gm mark.

US dollar in focus

On reason for gold price retracement from life-time high, market expert Sugandha Sachdeva said, “Gold prices jumped to a new record high of Rs.61371 per 10gm and around $2050 per ounce in the international markets during the week. However, a sharp rebound in the dollar index towards the close of the week from multi-month lows of 100.80 odd levels took some sheen off the yellow metal, pushing it into slight negative territory for the week. It was basically hawkish comments from one of the Fed officials that supported strength in the greenback across the board.”

Sugandha went on to add that gold prices initially spiralled higher as US consumer prices rose by 5% in March, the lowest level in 2 years, even as core prices remained stubbornly higher. Besides, the US Producer Price Index, a measure of wholesale inflation, declined to 2.7% as compared to 4.9% in February, reflecting that price pressures, though they remain elevated, are now receding from four-decade highs. There are a lot of hopes that the US Fed will finally wind down its rate hike cycle, which is leading to a decline in the dollar index and boosting the appeal of gold.

Speaking on the surprised hawkish stance of some US Fed officials, Nirpendra Yadav, Senior Commodity Research Analyst at Swastika Investmart said, “According to the minutes of the FOMC meeting, due to the banking crisis, there is a possibility of an economic recession by the end of this year, which may impact the next two years. However, Fed officials still favor a 0.25 percent interest rate hike as inflation is still running at high levels.”

Gold price outlook

Expecting some volatility in gold price in near term, Sugandha Sachdeva said, “While there are some signs of mild exhaustion in gold’s on-going rally and any further retreat in the dollar index would be negative for gold prices, they look likely to find cushion at ₹59,700 per 10 gm and then ₹58,500 per 10 gm mark, which correspond to support levels of $1,980 and then $1,945 per ounce in the international markets. Meanwhile, a closing above $2,000 per ounce is a positive signal, and the price set up at the domestic markets indicates that a break above ₹61,500 per 10 gm would bode well for the precious metal and can take it higher towards ₹62,500 per 10 gm mark in the coming days.”

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.