Gold prices remain volatile after US Fed rate hike, US GDP data. Buy or wait?

Silver rates too remained volatile after the US Fed rate hike and strong economic data release in the week gone by. Silver price on MCX ended ₹ ₹293 per kg higher at ₹74,040 levels on Friday. In international market, silver rates today is at $24.335 per ounce levels.

Triggers that dictated gold prices last week

Speaking on the reason highly volatile bullion market, Sugandha Sachdeva, Executive Director & Chief Strategist at Acme Investment Advisors said, “Gold prices remained highly volatile during an eventful week, where significant data releases coincided with the monetary policy meetings of the US Fed, ECB, and BOJ. The key highlight was the US Fed’s decision to raise interest rates by 25 bps to 5.25–5.50%, on expected lines. However, the Fed chair’s speech was mixed, indicating a likelihood of at least one more rate hike, but also emphasizing a data-dependent approach. This was perceived as neither overly hawkish nor dovish by the market participants and gold prices remained supported.”

Sugandha said that precious metal prices witnessed sharp volatility following the ECB’s decision to raise interest rates by 25 bps, while maintaining a dovish stance and the release of stronger-than-expected US Q2 GDP data (advance estimate), leading to a rebound in the dollar index and downward pressure on gold prices.

“The strong US GDP data suggested that any recession is currently not on the horizon. The data revealed that the US economy grew faster than anticipated in the second quarter, supported by the resilience of the labor market and increased consumer spending. Following this data, the dollar index rose towards a 2-and-a-half-week high, reducing the appeal of gold,” Sugandha added.

Gold price outlook

Expecting bounce back from the lower levels, Nripendra Yadav, Senior commodity Research Analyst at Swastika Investmart said, “Due to better economic data, the fear of economic recession has reduced, due to which investors are attracted to the US Dollar Index. However, major central banks’ continued tightening stance on monetary policy could hurt the global economy, which could support precious metals in the near term.”

Advising gold investors to remember key levels in domestic and international market, Sugandha Sachdeva of Acme Investment Advisors said, “During the week, gold prices encountered stiff resistance at around $1,985 per ounce levels and ₹59,700 per 10 gm levels and slipped sharply lower, only to recover towards the end of the week. As inflation in the US continued to cool, indicated by the reading of the June PCE core deflator, the dollar index witnessed some softening. On the downside, a significant support level exists at the $1,946 per ounce mark, and as long as this holds, gold prices are likely to witness a recovery. In the domestic markets, gold in the October series has key support at ₹59,000 per 10 gm levels and as long as the same holds, buying is recommended on declines, while prices can witness a surge towards ₹60,500 per 10 gm levels.”

Triggers that may dictate

“Key events to watch out for during the next week include CPI data for the eurozone and key data from the US-JOLTs job openings (June), ADP Nonfarm Employment Change (July), Manufacturing PMI (July), Services PMI (July) and Nonfarm Payrolls report (July),” Sugandha concluded.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

Updated: 29 Jul 2023, 02:56 PM IST