Gold prices have taken a dip, falling ₹3,300 from their record high as US non-farm payroll data failed to meet market estimates. This decline follows easing tensions in the Iran-Israel conflict and diminished prospects for a US Federal Reserve rate cut in the near future.
Gold Rate Trends
On the Multi Commodity Exchange (MCX), gold futures for June 2024 closed at ₹70,677 per 10 gm, marking a weekly loss of ₹809 per 10 gm compared to the previous week’s close of ₹71,486. In contrast, the gold rate today is significantly lower than its record high of ₹73,958 reached on 12th April 2024.
In global markets, spot gold ended last week at $2,301 per ounce, down from its previous Friday close of $2,349. The COMEX gold price finished at $2,310 per troy ounce level.
Reasons for the Gold Price Dip
Anuj Gupta, Head of Commodity & Currency at HDFC Securities, attributes the gold decline to several factors. Rising concerns over a possible delay in US interest rate cuts due to inflation risks and recent data indicating a surge in labor costs have contributed to the downward trend.
Praveen Singh, an Associate VP specializing in Fundamental Currencies & Commodities at Sharekhan by BNP Paribas, adds that traders are factoring in the latest Federal Open Market Committee (FOMC) policy decision and the ‘higher for longer’ rate narrative, which suggests only one rate cut this year. He notes that gold prices have slid lower in light of these factors.
Impact of US Non-Farm Payroll Data
The latest US non-farm payroll data also plays a crucial role in gold movements. Praveen Singh suggests that gold prices may face further pressure, as the data was positive but below market estimates. Anuj Gupta of HDFC Securities agrees, noting that while the non-farm payroll data was positive, the increase was lower than market expectations.
Key Levels to Watch for Gold
Anuj Gupta highlights important levels to watch in the gold market. COMEX spot has support at $2,266 and $2,237, while facing resistance at $2,322 and $2,345. On the MCX, gold futures support levels are at ₹70,080 and ₹69,580, with resistance at ₹70,950 and ₹71,700.
Should You Buy Gold Now?
For positional investors, Anuj Gupta advises waiting for a long entry, as prices may correct further from current levels. He suggests a favorable risk-reward scenario for long entry in the range of $2,250 to $2,265.
While gold have dipped from their record highs, it’s essential for potential investors to consider the broader economic trends and gold’s role as a safe haven asset. Keep an eye on global events and market data to make informed decisions about whether now is the right time to buy gold.
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Frequently Asked Questions
- Why have gold prices dipped recently?
- Gold prices have dipped due to easing tensions in the Iran-Israel conflict, the US non-farm payroll data failing to meet market estimates, and concerns over possible delays in US interest rate cuts due to inflation risks.
- What role does the US non-farm payroll data play in gold price movements?
- The US non-farm payroll data provides insights into the state of the US labor market. Positive data can impact the Federal Reserve’s decisions on interest rates, which in turn can influence gold prices. Lower-than-expected non-farm payroll data may suggest a weaker economy, potentially affecting gold prices.
- What are the key levels to watch for gold prices?
- According to Anuj Gupta, important levels to watch include COMEX spot gold price support at $2,266 and $2,237, with resistance at $2,322 and $2,345. For MCX gold futures, support levels are at ₹70,080 and ₹69,580, while resistance levels are at ₹70,950 and ₹71,700.
- Is now a good time to buy gold?
- Whether now is a good time to buy gold depends on your investment strategy and risk tolerance. Anuj Gupta suggests waiting for a long entry, as gold prices may correct further from current levels. He recommends a range of $2,250 to $2,265 for favorable long entry.
- What impact does the easing Iran-Israel conflict have on gold prices?
- The easing Iran-Israel conflict reduces geopolitical tensions, which diminishes the safe haven appeal of gold and can contribute to a decline in gold prices.
- How does US inflation risk affect gold prices?
- US inflation risk can lead to changes in Federal Reserve interest rate policies. Rising inflation may prompt the Fed to maintain or raise interest rates, potentially reducing gold’s appeal as an investment and causing prices to fall.
- Why did gold prices decline after recent labor cost data?
- Recent labor cost data showed a significant increase, which may put pressure on gold prices as it suggests persisting inflation risk. This, in turn, can influence Federal Reserve policies and affect gold’s appeal as an investment.
- What does “higher for longer” rate narrative mean for gold prices?
- The “higher for longer” rate narrative suggests that interest rates may remain elevated for an extended period. This can lead to a decrease in gold’s appeal, as higher interest rates can make other investments more attractive.
- What is the risk-reward scenario for gold investors right now?
- Anuj Gupta suggests that the risk-reward scenario for gold investors is favorable in the range of $2,250 to $2,265. Investors should consider this range for a long entry point in gold.
- What should positional investors consider when investing in gold?
- Positional investors should consider market trends, economic data, and geopolitical events when deciding whether to invest in gold. Timing entry and exit points based on key support and resistance levels can help optimize investment decisions.
