Gold prices ended last week marginally higher with heightened volatility in financial markets and escalating trade spat between two strongest economies.
Weak March NFP (non-farm payroll) report caused sudden drop in the dollar last Friday. US 10-year bond yield also tumbled 2 per cent post report. These factors made the gold preferred buying bet for momentum seekers.
But despite all the odds, prices of gold failed to garner enough speed to break its key hurdle point of $ 1,375 per ounce. This is something to worry about in short term, as what would happen to precious metals, if global trade war worries subside.
Most of the gold price drivers such as bond yield, dollar, crude oil have skewed their movement for some time, ditto is the case of gold, moving between $ 1,308 and $ 1,375 since January 25.
Last week was full of a series of trade attacks and counterattacks between the US and China.
This trade war game started by the US when they first imposed 10 per cent tariff on aluminum and 25 per cent on steel imports from China sometime back and then slapped tariffs on $ 50 billion in Chinese imports. China retaliated soon after and since then both have been indulging in new tariffs every alternate day or two to mark a win over each other.
Safe haven demand for the gold has subsided by the recent easing in tensions between the US and North Korea after latter’s leader Kim Jong-Un showed wiliness to talk to US President Donald Trump about denuclearisation.
US March NFP report came weaker-than-expected, surprisingly fell to 103,000, well below expectations of 193,000 — the fewest jobs in six months — leaving outlook for monetary policy unchanged, adding another support to the gold.
Earlier, dovish US Federal Reserve March policy, regarding upcoming rate hike pace for this year provided support to the bullion. Fed maintained two more hikes possibility for this year against the expectations for three more.
US dollar seems to be digesting all news easily, as it is still moving within a 2-month long consolidation range of 88.15 to 90.90, break of it will pave the way for a directional move, till then crisscross will continue. If dollar slips below 88, certainly it will be a biggest booster for commodities, including gold.
CFTC Gold speculative net long positions have dropped to 166,600 to the week ended April 6 against previous week’s reading of 203,400. While, silver speculative net long positions fell further to 17,000 from a week earlier level of 13,700.
Prices trajectory: Prices have been consolidation between $ 1,303 and $ 1,370.5 after hitting 2018’s high of $ 1,370.5 on January 25.
Prices have to sustain above $ 1,375 to resume a medium-term rally, otherwise time consolidation will prolong for more time. On downside, break of $ 1,300 will trigger selloff in the short term.
(Tarun Satsangi is Head of Research for Commodities and Forex at Globe Commodities. He has 12 years of experience in financial markets. Views expressed in this article are author’s own and do not represent those of ETMarkets.com. Readers are advised to consult their financial advisers before taking any position based on these observations)