The international gold market faced heightened turbulence, reaching a two-month low of approximately $1,992 per ounce following the release of unexpected US Consumer Price Index (CPI) data. Despite a partial recovery due to value buying in the subsequent weeks, the precious metal struggled to fully offset its recent losses, with gold futures contracts on the Multi Commodity Exchange (MCX) for April 2024 expiry marking a second consecutive week of decline.
Commodity market experts attribute the pressure on gold prices to the surge in the US CPI data, raising speculation that the US Federal Reserve may delay interest rate cuts as inflation concerns persist. This speculation triggered an uptick in US dollar rates, reaching a three-month high. However, a subsequent release of softer-than-expected US retail sales data led to a retracement in the US dollar, encouraging some value buying in gold. Weak economic data from the UK and Japan also contributed to a rebound in precious metal prices.
Anuj Gupta, Head of Commodity & Currency at HDFC Securities, highlighted that the release of higher-than-expected US CPI data fueled concerns that the US Fed might not reduce interest rates until June 2024, maintaining higher rates until mid-2024. This shift in sentiment increased demand for the US dollar, pushing it to a three-month high. The subsequent profit-booking in the US dollar, triggered by softer retail sales data, facilitated a recovery in gold prices from their recent lows.
Discussing recent market triggers, Sugandha Sachdeva, Founder of WealthWave Insights, emphasized the volatility in gold prices following the release of US CPI figures, which surpassed expectations for January. The inflation rate rose to 3.1 percent on an annualized basis, exceeding the anticipated 2.9 percent. This reinforced expectations of prolonged higher rates in the US, leading to a stronger dollar and exerting downward pressure on gold. However, softer retail sales data tempered the dollar’s strength, renewing interest in gold. Sachdeva noted that weak economic indicators from the UK and Japan contributed to increased demand for gold as a safe-haven asset.
Looking ahead, Sachdeva expressed a positive outlook for precious metals, supported by ongoing geopolitical tensions. She suggested potential resistance levels for gold at ₹62,400 per 10 grams and for silver at ₹72,700 per kilogram. Sachdeva advised investors to consider opportunities during price pullbacks, identifying favorable entry points at ₹61,200 per 10 grams for gold and ₹71,000 per kilogram for silver.
She also highlighted the significance of the upcoming release of Federal Open Market Committee (FOMC) minutes, anticipating insights into the Federal Reserve’s monetary policy stance and potential implications for the precious metals market.
