Gold has witnessed a spectacular first half this year with a mammoth gain of almost 25 per cent. Global economic concerns, political and economic uncertainty caused by Brexit and loose monetary policy stance of major central banks are some of the factors which have helped pushed gold price to the highest level since 2014.
However, gold price have turned rangebound in last few days as market players await fresh triggers to extend the gains. Gold has been trading in a narrow range above $1300/oz since start of August indicating lack of direction.
Gold has witnessed sharp movement this year caused by various factors like sell-off in Chinese equity market sell-off, volatility caused by Britain’s vote to exit the European Union and slump in bond yields due to monetary easing measures by central banks. However, market focus has now shifted back to US Federal Reserve’s monetary policy stance.
The US central bank has changed its stance numerous times this year owing to global economic uncertainty. However, Fed now has only three meeting left and market players want clarity whether they will raise interest rate or not. Fed wants to be patient on interest rate hikes however optimism about US economy and stability in equity market has intensified debate whether Fed will make a move or not.
The biggest events to look for in the near term are US Q2 GDP growth estimate and Fed Chair Janet Yellen’s comments at the Jackson Hole Symposium. These factors will determine whether Fed will take a decision at the September meeting or defer it further till December meeting. In the near term, gold may consolidate in a broad range of $1310-1360 per troy ounce unless there is more clarity from Fed but bias may be on the downside.
(The author is Madhavi Mehta, AVP research at Kotak Commodities)