Gold prices saw a tailwind as global rating agency Fitch Ratings downgraded the US government’s credit to AA+ from AAA on Wednesday. However, the yellow metal pared its gains as the dollar gained sharply on safe-haven demand, making the bullion less attractive for investors. The unexpected surge in US private payrolls for the month of July has contributed to the muted performance of gold prices, since the market predicts it might lead to further monetary policy tightening from the US Federal Reserve.
While analysts claimed that gold prices would see support as investors took flight from equities to safer assets, the metal pared all the gains recorded yesterday. Instead, traders flocked to the dollar, pushing the currency higher on the risk-aversion sentiment. On the MCX, gold October futures fell 0.24% to Rs 59,328 today while the dollar is trading at 4-week highs.
- Yesterday, the dollar index closed above the 102 level, at 102.59. So far today, the DXY is up 0.18% at 102.77.
- So far this year, gold prices are up around 4.7% on the MCX. From yesterday’s close of Rs 59,471 per ten grams, gold futures tanked 0.24%.
The selling pressure in gold is expected to be short-lived unless the US jobs data comes in stronger than expected, which will favour Fed’s hawkish camp group in keeping interest rates high, said Bhavik Patel, Sr Commodity/Currency Research Analyst, TradeBulls Securities. In the short term, gold is expected to remain vulnerable to price shocks but in the medium and long term, gold prices still are expected to remain positive and in favour of the bulls, he added.
Adding to the prevalent opinion, Prathamesh Mallya, DVP Research, Angel One, said that gold prices are expected to continue facing downward pressure due to the recent upsurge in the dollar, driven by robust economic data from the United States in the short-term. Jateen Trivedi, VP Research Analyst, LKP Securities, said that even if spot gold underperforms on the dollar rise, the fall in the rupee will act as a positive for domestic gold prices. Gold has always outperformed during crises like the pandemic, the Ukraine-Russia war or the so-called ‘US debt crisis’, and will continue to do so.
Technical Levels to watch
Gold price broadly looks likely to take support of Rs 58,000, as even if Spot gold underperforms due to dollar rise the rupee fall adds domestic Gold rate to remain positive towards Rs 60,000-62,000 in near term, said Jateen Trivedi.