Gold prices opened on the Multi Commodity Exchange (MCX) on Friday at Rs 59,091 per 10 grams and hit an intraday low of Rs 58,987. In the international market, prices hovered around $1,953.05 per troy ounce. Meanwhile, silver opened at Rs 73,753 per kg and hit an intraday low of Rs 73,740 on the MCX. The price hovered around $24.24 per troy ounce in the international market.
Anuj Gupta, Vice President of IIFL Securities, said, “Yesterday, gold prices corrected from their day’s high of 59680 levels by 0.79% and closed at 5 8985 levels. We noticed that robust U.S. economy data pulled down demand for the yellow metal. The U.S. advance GDP [growth estimate came in] at 2.4%, higher than the previous of 2%. Unemployment claims at 22,100, were below the previous [expectations] of 22,800. These positive data boosted the dollar index, trading above 101 levels. FOMC increases interest rate by 25 basis points. In international market gold is trading at $1949 levels per ounce.”
He sees technically strong support at 58600 levels and then 58300 levels, Resistance at 59100 and then 594000 levels. Today, one can sell on the rise around 59100-59200 levels with a stop-loss of 59400 and for the target of 58600 to 58500 levels. Gold may test $1940 to $1935 levels in international markets.
The U.S. Q2’s annualised GDP, supported by resilient consumer spending and strong business investment, clocked a growth of 2.40% QoQ, beating the forecast of 1.80%. Personal consumption (2Q A) rose by 1.60% Vs the estimate of 1.20%. Durable goods orders (June Preliminary) rose by 4.70%, which topped the forecast of 1.30%. Even Durables, for example, transportation data, beat the estimate. Jobless claims (for the week of July 22) fell to 221k from the prior reading of 228k, which was better than the forecast of 235k. Similarly, pending home sales (June) were up by 0.30% Vs the forecast of -0.50%.
Praveen Singh – Associate V.P., Fundamental Currencies and Commodities, Sharekhan by BNP Paribas said, “Yesterday, as expected, European Central Bank (ECB) hiked the interest rate by 25 bps, thus bringing the deposit rate to 3.75%. ECB’s President Ms Lagarde was somewhat dovish in her statements as she acknowledged that the European economic situation was deteriorating and there will be two inflation readings between now and September to assess the situation so far as the next meeting in September is concerned. She added that Bank may or may not hike at the next monetary policy meeting as she made it clear that the Bank will be data-dependent in its future monetary policy decisions. Germany’s yields tumbled as trades slashed the odds of a rate hike in September.”
U.S. data weighed on bonds, thus yields jumped. Two-year U.S. yields at 4.926% were up 1.58%, while ten-year yields jumped 3.29% to finish the day at 4%. Bonds were pressured further as Nikkei reported that the Bank of Japan would discuss its YCC (yield curve control) policy at its monetary policy meeting on July 28. The U.S. Dollar Index was up 0.59% to close at 101.69. Spot gold closed with a loss of 1.28% at $1246.90.
“Fundamentals of gold are presently weak as the Fed rate cut possibility has become the only game in town. With encouraging GDP data and a tight job market, gold is overpriced. Today’s U.S. data include crucial PCE deflator inflation (June) and U. of Michigan sentiment (July F). The eurozone’s data docket includes Germany’s CPI and Euro-zone’s consumer, economic, and industrial confidence. Gold is expected to trade with a bearish bias. Bank of Japan’s decision will be crucial for the metal,” said Singh.
Gold prices held near two-week lows after strong U.S. economic data spurred the dollar and bond yields in a high interest rate environment, dragging the metal towards its biggest weekly decline in five.
Manav Modi, Analyst, Commodity and Currency, MOFSL, said, “The U.S. dollar index and 10-year yields were underpinned after data showed the U.S. economy grew faster than expected in Q2 potentially keeping a much-feared recession at bay and increasing the likelihood that the Fed could further hike interest rates. The dollar index was a bit weighed down after the Fed policy meeting, where the U.S. central bank raised rates by 25bps, maintaining a cautiously hawkish stance. The Fed and the European Central Bank delivered 25bps rate increases this week but have now switched in unison to a more cautious posture about further moves. US GDP Q2 was reported at 2.4% v/s 2%, also U.S. durables goods orders data was also reported better than expectations supporting the move in Dollar index. Today’s focus will be on the U.S. Core PCE price index data, which could further guide Fed’s monetary policy.”
According to experts, in line with earlier projections, the 25-bps interest rate hike, carries substantial implications for the Indian economy. As inflation persists and U.S. interest rates continue to climb, India may opt to maintain its current rates.
Rohit Arora, CEO and Co-founder, Biz2Credit and Biz2X said, “The potential risk of a U.S. recession could adversely affect our exports, while the rising oil prices present additional challenges. Although favourable monsoon brings hope for local agriculture, it is essential to remain vigilant, as the Rupee may encounter pressures from soaring oil prices and a potential export slowdown. Moreover, foreign investments could be influenced by the Federal Reserve’s outlook. With the imminent interest rate increase by the Fed, the global community remains cautious about the lingering impact of inflation.”
Source: Business Today
