August gold futures prices hit a three-week high in COMEX. Traders should wait for correction around Rs 58,950-58,900 for expected target of Rs 59,500 and stoploss of Rs 58,500.
By Bhavik Patel
The dollar had one of its deepest one-day declines since January 2023 after US CPI came lower than expected. The dollar index opened at 103 on July 6 and has lost 2.75% in the last five trading days. Gold gains can be attributed to dollar’s weakness and not any bullish market sentiment as Gold gained approximately 2.13% in the same period when dollar lost around 2.75%. The consumer price index report for June came in up 3.0%, year-over-year, which is a little less than the rise of 3.1% that was anticipated and contrasts to the gain of 4.0% in the May report. These figures support the monetary policy dovish position, which calls for the Federal Reserve to maintain current levels of interest rates.
August gold futures prices hit a three-week high in COMEX. As mentioned above, the strength in gold prices is on account of dollar weakness and not any shift in bullish sentiment. Now gold is in search of fresh momentum. Having found support in the $1900 area, the potential for an upside extension will require continued softness in economic data. Apart from December, July has for the past five years delivered the strongest average return, and whether history can repeat itself will depend on incoming US economic data, especially more soft US CPI.
The last month has seen a significant outflow of investment from gold-backed funds, judging by investor movements across several of the biggest commodity ETFs. The demand for alternative investments has decreased because the yellow metal has been coping with rising Treasury yields and combative stock markets. MCX Gold rate has retracted back to its 50% of correction we witnessed from highs of Rs 61,845 to lows of Rs 57,651. Now it is at cross-roads where on the higher side, there is major resistance while the last three trading days suggest price might have overstretched in the very near term.
In COMEX, gold price has resistance between $1970- $1985 and breach only above $1985, will we see the fresh upside momentum. In MCX, the major resistance zone comes near Rs 59,700-60,300. We would wait for some dip before recommending going long. One can wait for correction around Rs 58,950-58,900 for expected target of Rs 59,500 and stoploss of Rs 58,500.
(Bhavik Patel is a commodity and currency analyst at Tradebull Securities. Views expressed are the author’s own. Please consult your financial advisor before investing.)
Source:financialexpress.com