Gold prices continued to fall and tested six-week lows amid concerns about tighter monetary policy by major central banks. Recent bullish rhetoric from several Fed officials, weighing in on gold prices while stressing the need for price stability, has now led the market to hike rates by 75 bps at the Fed’s September meeting. The dollar index advanced for the third week in a row and touched a two-decade high of 109.97, keeping gold prices under pressure. Annual inflation in the eurozone hit another record high of 9.1% in August, prompting bets for a major rate hike by the ECB at its meeting next week.
Besides, a strong US manufacturing PMI reading for August further suppressed gold prices. The US economy added 315,000 jobs in August, according to key data for the week, slightly higher than expected for an additional 300,000, but less than the impressive job growth of 528,000 in July. The unemployment rate rose slightly to 3.7% against a forecast of 3.5%, which has now eased the nerves of the market somewhat as it prompted the US central bank to slow the pace of rate hikes in the fourth quarter of the year. Can do.
Gold Price Outlook
If we look ahead, gold prices The international markets have been declining continuously for the last six months. However, in their current down cycle, prices have tested a level close to long-term support at the $1680 an ounce mark, leading to renewed buying interest at lower levels as the focus is now turning to a slowdown in economic growth. is growing. , In the short term, prices may consolidate for some time, but remain under significant support of 48,800 per 10 grams in the domestic markets. At a higher level, there may be a recovery towards from 51,200 51,500 per 10 gram area for the coming week. On the other hand, $1680 per ounce or . in case of conclusive violation of the sacred support of On a close basis, we may see significant downside pressure in Gold at 48,800 per 10 grams level.
Gold price trigger for this week
As far as the various factors that unfold next week are concerned, the greenback’s momentum should be closely monitored. The dollar index is trading close to 109.97, a 20-year high, so if the greenback softens slightly, one can expect a recovery in gold, while an upward push in the dollar index will take the price of the precious metal. will act as a headwind. Metal. In addition, market participants will be eyeing the OPEC+ meeting early next week. Any decision to cut production by OPEC and allies could support oil prices, while if there is no production cut when demand weakens in China, we will continue to weigh in on oil prices, impacting inflation expectations. And you can see the pressure.
The announcement of the new UK PM on Monday will also be on the radar of market participants. The meeting of the European Central Bank will be another major highlight of the coming week. Inflation in Europe has risen for the ninth consecutive month, and adding to the problems of a weak euro area, it has strengthened the case for a 75 bps rate hike by the ECB. At a time when the sector is already facing a severe energy crisis and will support gold prices in the long run, a string of large hikes will further undermine growth. In addition, the focus will be on Eurozone and UK PMI data, the final S&P US Services PMI, as well as the ISM Services Index.
(The author is Vice President – Commodity & Currency Research, Religare Broking Ltd. Views expressed are purely personal and not of Mint)
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