Gold prices held steady on Friday, set for its second consecutive weekly gain, supported by a weaker US dollar as markets grew confident that the Federal Reserve was done with its interest rate hikes, according to a Reuters report. Spot gold held ground at $1,992.73 per ounce, as of 0431 GMT. Bullion has risen 0.7% this week. US gold futures were little changed at $1,993.60.
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Back home, Gold futures, maturing on December 5, 2023, stood at ₹61,150 per 10 grams on the MCX, after recording a marginal hike of ₹59 or 0.10%. The previous close was recorded at ₹61,072.
The trigger
According to analysts, these movements come amidst shifting economic data and deliberations within the Federal Reserve that have stirred both confidence and hesitancy within the market. Analysts point to a confluence of factors contributing to the stability and potential upward trajectory of gold.
Tim Waterer, Chief Market Analyst at KCM Trade, emphasised the correlation between falling yields, a weakening US dollar, and the positive implications for gold's ascent.
"The dollar index's second consecutive weekly decline rendered gold more affordable for investors using other currencies, further fortifying its appeal," Waterer was quoted as saying in a Reuters report.
The recent data showcasing a larger-than-expected drop in new claims for unemployment benefits led to a recalibration of expectations around Fed rate cuts in 2024. Earlier this week, the Fed minutes showed the central bank would proceed "carefully" and "all participants judged it appropriate to maintain" the current rate setting.
Rahul Kalantri, VP, Commodities at Mehta Equities, highlighted the response of precious metals to lackluster US economic data, particularly the disappointing durable goods and core durable goods orders, hinting at a potential halt in interest rate hikes by the Federal Reserve.
Amidst these dynamics, market sentiments regarding Fed rate adjustments present a discrepancy. While market expectations lean towards rate cuts, the Fed's cautious approach, as indicated in the recent minutes, has led to some ambiguity. Lower rates inherently diminish the opportunity cost of holding gold, rendering it a more attractive investment option.
The outlook
Looking ahead, Kalantri foresees potential resistance levels for spot gold around $1,999 per ounce, with a potential breakout paving the way for gains up to the $ 2,009-$2,016 per ounce range. Similarly, in the Indian market, support levels for gold stand at ₹60,920-60,760 per 10 grams, with resistance noted at ₹61,280 and 61,470 per 10 grams.
Investment considerations
Amidst this landscape, Chintan Mehta, CEO of Abans Holdings, underscores the gradually rising participation in gold investments, suggesting an impending extended rally. Mehta encourages the strategic accumulation of gold, particularly during price corrections, anticipating resistance around ₹61,900 per 10 grams.
However, the potential breakthrough of this resistance level could usher in further upward momentum, while corrections might lead to a downturn towards ₹60,000 per 10-gram levels.
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