By Bhavik Patel
Every time Gold sets a new record high, there is typically a follow-up sell-off that results in a healthy correction that helps to restore equilibrium in the overbought conditions. This is also a result of shrewd money taking profits at the first signs of a correction, which causes a significant decline in prices, which continues until fair value is reached.
On domestic front, MCX gold has been dealt with heavy hand as we saw fall of as much as 5% on budget day when FM slashed the import duty from 15% to 6%. Today the downfall continued as profit booking was seen in international market where gold in COMEX breached below $2390 at the time of this writing.
Two important economic reports that will provide insight into the state of the US economy are highly anticipated by investors. Just a few days before the Federal Open Market Committee (FOMC) meets in July, these reports which are scheduled for release on Thursday and Friday will offer crucial information.
The Commerce Department will release its initial estimate of GDP growth for the second quarter on Thursday, July 25. An annualized growth rate of 2% is anticipated by economists, which is a notable increase from the 1.4% seen in the first quarter.
This data will provide insightful information about the resiliency and trajectory of the economy. Following closely would be the release of PCE inflation index and this report is particularly significant as the core PCE is the Fed’s preferred measure of inflation.
At the upcoming July meeting, there is currently a 93.3% chance that the Fed will keep its benchmark interest rate between 5.25% and 5.50%. The CME’s FedWatch tool indicates an 89.6% probability of a 0.25% rate cut, a 10.2% chance of a 0.50% cut, and a newly added 0.3% possibility of a 0.75% cut in September.
Some buying activity may be witnessed from $2368-$2360 that may take Gold to nearest resistance zone of $2384-$2390 which if cleared preferably with a day close, can extend to $2400 psychological handle that coincides with 4 hourly rising 100 SMA.
In MCX, prices are in oversold condition as RSI_14 is near 28 but we have to overlook the fact that nearly fall of nearly 4000 points in Gold was on account of slash in custom duty. So MCX chart is not representing the true picture but COMEX chart is showing selling pressure as prices have breached its $2390 support.
As stated we might see some value buying emerging around $2368-$2360 zone. We would advice traders to remain on the sidelines till PCE data is not released on Friday and any fresh positions can only be taken after that.
(About The Author: Bhavik Patel is Sr. Commodity/Currency Research Analyst at TradeBulls Securities)
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