Gold price on Friday on Multi Commodity Exchange (MCX) gained 0.01 per cent and closed at ₹47,455 per 10 gm levels. However, this rise in MCX gold rate was not enough to pare the slump in yellow metal price this week. Compared to its last Friday close of ₹48,083 per 10 gm, MCX gold price today is down ₹628 per 10 gm and it is close to its 2-month low. In international market, spot gold price closed at $1795.92 per ounce, logging weekly loss of near 2 per cent.
According to commodity market experts, gold price has remained weak throughout this week as strong US bond yield contained any chances of rise in gold price. They said that higher bond yield has helped US dollar gain against major global currencies in the Forex Market, providing an extra option to gold investors. However, they maintained that despite weakness in yellow metal price throughout this week, spot gold price has been able to sustain above its support of $1760 and it has been trading in the range of $1760 to $1830 per ounce.
Triggers for gold price
Gold experts were of the opinion that chances of gold price rise in next one to two week looks unlikely as US Fed has announced that increase in interest rates may come sooner than expected. This hawkish stance by the US central bank has worked as trend reversal for the gold price outlook and investors are waiting for the final outcome from this month’s Fed meeting.
Speaking on the reason for weakness in gold price today; Anuj Gupta, Vice President — Commodity & Currency Trade at IIFL Securities said, "Reason for weakness in gold price can be attributed to reasons like firm US bond yield, appreciation in the US dollar against major global currencies in the Forex Market and US Fed's hawkish stance on interest rate increase. The recent rise in the US bond yield has helped US currency to appreciate against major global currencies in the Forex Market. This gave gold investors some choice to diversify their portfolio. Apart from this, recent US Fed's announcement to expect interest rate increase sooner than expected has worked as trend reversal for the gold price outlook in near term. After this US Fed's announcement, commodity market is speculating that Fed may announce interest rate increase in its meeting this month, which is scheduled on 25th January 2022."
Anuj Gupta of IIFL Securities advised gold investors to keep an eye on the US economic data coming this week as it would indicate whether the interest rate increase is coming in this month's Fed meeting or not. He said that US data giving rise in inflation number may lead to US Fed announcing some more step in regard to bond tapering and in that case panic selling in gold can be expected. However, any development in inflation control should be considered as good opportunity for gold rally.
Advising gold investors to keep an eye on spot gold price; Amit Sajeja, Vice President — Commodity Research at Motilal Oswal said, "Despite weakness in gold price throughout this week, it has managed to sustain above $1760 per ounce levels, which is a good sign for gold price outlook. Currently, spot gold price is trading in the range of $1760 to $1835 per ounce levels and weakness or bullishness can be considered on breakage of either side of the range."
Unveiling investment strategy for gold investors, Anuj Gupta of IIFL Securities said, "Till the US economic data comes, one should maintain sell on rise strategy. In spot market, $1815-1820 levels should be seen as an opportunity to sell maintaining stop loss above $1835 per ounce levels while one should book profit at around 1780-1785 per ounce levels. One should avoid buy on dips till the US economic date comes as gold price outlook looks sideways with negative bias for this period."
For gold investors in domestic market; Sumeet Bagadia, Executive Director at Choice Broking said, "MCX Gold rate has strong support at ₹46,500 whereas it has strong resistance at ₹48,500 per 10 gm levels. Any rally in gold can be expected only when it breaks this ₹48,500 hurdle whereas its support at ₹46,500 is expected to remain intact till arrival of another trigger either in domestic or in the international market." He said that spot gold price may go down towards $1720 per ounce levels if the lower support is broken whereas $1880 to $1900 per ounce would be the next target if the upper hurdle in spot gold price is breached.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
