Gold price jumps for second straight week on US Fed rate-pause buzz. Buy or wait for FOMC meeting?

According to commodity market experts, gold and silver prices are sideways to positive as US dollar has retraced from its ten week higher levels as market is speculating rate-pause from the US Federal Reserve in upcoming Federal Open Market Committee or FOMC meeting scheduled next week from 13th to 14th June. They said that after surge in US jobless claims to highest levels in last one and half years, US central bank may feel the pressure to end interest rate hike cycle. They advised ‘buy on dips’ strategy to gold investors as gold is currently sideways to positive and one should see every dip as a n opportunity to buy or accumulate.

US dollar in focus

On why gold price surged for second week in a row, Sugandha Sachdeva, Executive Director & Chief Strategist at Acme Investment Advisors said, “Gold prices have been on an upwards incline for the last two consecutive weeks as the dollar index has softened amid hopes that the US Fed might hit the brakes on its tightening spree next week. The surge in US jobless claims to the highest level in 1-1/2-years as per the latest data has flagged worries about the fragility of the labor market, potentially pushing the US central bank to put an end to the interest rate hike cycle.”

On other reasons that fueled gold prices last week, Nirpendra Yadav, Senior Commodity Research Analyst at Swastika Investmart said, “Gold and silver prices registered gains from lower levels in the previous week due to weak cues from major economies.”

Gold price outlook

On outlook for gold price in near term, Prithviraj Kothari, National President at India Bullion and Jewellers Association (IBJA) said, “The US ISM PMI data has been below 50 over the past six months, and data for the month of May showed that manufacturing activity decreased to a level lower than analysts had predicted, falling to 46.9. A low PMI (below 50) indicates a slowing economy, which should support the price of the yellow metal. The rate of growth for the services sector has slowed down from the previous six months due to the decline in employment and ongoing advancements in capacity and delivery times, which are in many ways a result of weak demand.”

Prithviraj Kothari, who is MD & CEO at Riddi Siddhi Bullions as well, further added, “The gold market has seen a solid bounce off of support from $1,935 ( ₹59,200), and the disappointing economic data is providing new momentum. The next resistance is $2,000 ( ₹60,400) and $2,025 ( ₹61,000).”

On triggers and pivot levels in regard to gold price in near term, Sugandha Sachdeva said, “In the midst of this uncertainty, gold prices are gyrating in a tight range of ₹59,200/10gm to ₹60,400/10gm and as long as these levels are not breached on either side, a decisive move looks elusive. In the international markets, prices have been confined in the range of $1,935 per ounce and $1,985 per ounce. Whether the Fed will leave its policy rate unchanged or not, it would also be crucial to watch out for the policy outlook for the year ahead. A breach on either side of the range would decide the next course of precious metal’s move. Any convincing breach of ₹59,200/10gm would spell further weakness for gold, while a move above ₹60,400/10gm would hasten an advance in the precious metal.”

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.

Updated: 10 Jun 2023, 07:13 AM IST