Gold prices have been relatively quiet and is consolidating between $ 1,280 and $ 1,307 an ounce as the precious metal lacks clear direction amid a diverse set of fundamentals.
The gains were capped as prices absorbed the positive outcome from the crucial summit between the US and North Korea. Both leaders signed an agreement after historic talks held in Singapore.
Kim’s government has agreed to surrender its nuclear capabilities in return for some unique security guarantees by the US.
Also, the US Federal Reserve rate hike of 25bps and hawkish instance of policymakers indicating two more rate hikes in 2018 did not hurt gold prices much.
On the data front, recent data on US retail sales, import prices, and new jobless claims have all been encouraging. All of these point towards improving economic conditions in the US, and have led to a revival in the dollar, yet again capping the gains in the yellow metal.
However, the argument on the positive side is the escalating worries over trade tensions between the US and China, eliciting safe-haven demand for the metal.
Trade fears have again come to the fore as Trump’s administration has announced tariffs on $ 50 billion of Chinese goods. Trump’s policies bring about a lot of uncertainty as he embraces trade conflict and this turns investors across the globe towards gold.
The depreciating rupee is further aiding prices at domestic bourses.
As far as price trajectory is concerned, we are witnessing strong support emerging at $ 1280 an ounce mark at COMEX, corresponding to Rs 30,800 per 10gm at MCX.
Prices are trying to find their way up after weeks of consolidation and look set for a breakout on the higher side, where they will initially target $ 1,325 an ounce or Rs 31,650 per 10 gm.
Once that hurdle is cleared, it will pave the way for higher targets of close to $ 1,365 an ounce or Rs 32,200 per 10 gm.
On the contrary, any break below $ 1,280 an ounce or Rs 30,800 per 10gm at MCX will negate our long view as the trend will then turn southwards and prices will target lower levels of $ 1,260 an ounce or Rs 30,500 per 10gm at MCX.
Additionally, any further news regarding trade tensions and movement in the dollar index will offer cues to the gold’s move going forward.
Disclaimer: The author is Vice President – Metals, Energy & Currency Research, Religare Broking Ltd. The views and investment tips expressed by investment expert on Moneycontrol.com are her own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.