The precious metal posted a second weekly gain after the recent correction in prices, which continued the rally in gold prices. The dollar index fell for the second week in a row and the benchmark 10-year note slipped to a six-week low, both favoring strength in the yellow metal. However, gains were limited by the US Fed’s aggressive stance in its May 2022 meeting minutes. Additionally, relief in global equities weakened the appeal of bullion. Therefore, it becomes important for a gold investor to be vigilant about key triggers that could affect the volatility of gold prices in the short term.
Speaking on important factors that can affect gold price Vipul Srivastava, Research Analyst, Metals and Energy Research, Religare Broking Ltd. said, “A few key factors will continue to dominate the headlines in the coming week. First and foremost, the dollar direction will be crucial as a return to the dollar index of gold In a brief week with holidays in major global markets, the focus will be on China’s manufacturing data along with inflation data from major European economies. On Friday, US non-farm payrolls and employment data on the economic calendar which will provide clues about the health of the world’s largest economy and may set the subject for further bullion prices.”
Here we list out the top 5 triggers that can determine the volatility of gold prices in the next week:
1]Dollar Index: “After climbing to a 20-year high, the dollar index has dropped to around 101, leading to a rise in gold prices over the past two weeks. As speculation of a slowdown in the US economy remains high, the index may see further downside. In the spot market, the price of gold has reached $ 1900 an ounce.
2]Chinese Manufacturing Data: After the lockdown, the whole world is looking towards China as it is expected to share its manufacturing data this week. Any weakness in the data could trigger a sell-off in global equities, which could lead to increased demand for a ‘safe haven’ for investors. Hence, gold investors are advised to be cautious about Chinese manufacturing data.
3]European Central Bank: Following the US Fed’s tough stance on interest rate hikes, speculation is high that the European Central Bank may raise interest rates. If this happens, it will be a huge loss for global equity markets as FIIs may choose to withdraw money from equities and invest in Euros. In such a situation, there may be a rise in the euro and gold.
4]Rupee Vs Dollar: “After hitting a life-time low, the Indian National Rupee (INR) gained some losing ground against the US Dollar (USD) last week. Further rise in gold prices put some pause on gold’s rally. However, in case of weakness in INR. “Gold prices may rise as global triggers are favorable for gold rush,” said Anuj Gupta, IIFL Securities.
5]US non-farm payroll and employment data: The release is expected on Friday next week. In case of disappointing numbers, demand for the precious metal is expected to move north as speculation of a slowdown in the US economy is already rife.
Disclaimer: The views and recommendations given above are those of individual analysts or broking companies and not of Mint.