By Bhavik Patel
Gold market has been stuck in the $1830-1860 range for the past two weeks. Despite prices trading in range, bullish sentiment in the gold market reached a record high last month among retail investors. Retail investors took advantage of a lower gold price amid wider macroeconomic uncertainty. The Federal Reserve is expected to announce another half a percent rate hike at next week’s FOMC meeting. Gold traders and investors have maintained a wait and see attitude recently as they await next week’s FOMC meeting.
In anticipation of a 50bps rate hike, US Treasury yields have started climbing pushing USD higher and gold trading around the lower end of the range. Major point today is the U.S. consumer price index report for May. The CPI is expected to be up 8.2%, year-on-year, after a rise of 8.3% in April. Another hurdle for the gold market would be from the ECB as they are gearing up for rate hike.
The European Central Bank signaled that it will raise interest rates with a 25-basis point move in July followed by a potentially 50-basis point move in September. The U.S. dollar has benefited from the growing monetary policy gap as the Federal Reserve has led the market in aggressive monetary policy tightening. The Federal Reserve has signaled it will raise interest rates by 50-basis points later this month and again in July.
Currently the gold market is neutral and stuck in range with no buying momentum seen with the upcoming FOMC meet. In MCX, gold is stuck in the range of 50000-51400. Even Indian Rupee has also not gone anywhere which also helped MCX gold to remain in range. RSI_14 has again started losing momentum on the upside as it is trading at 47 and prices are near the 20 and 50-day moving average suggesting no clear trend. We would recommend investors to wait for either breakout above 51400 or breakdown below 50000 to commence any fresh positions. At present, gold is not expected to go anywhere as market participants are sidelined ahead of the FOMC meet and no clear direction.
(Bhavik Patel is a commodity and currency analyst at Tradebulls Securities. Views expressed are the author’s own. Please consult your financial advisor before investing.)