Gold Analysis
Afternoon Session: Gold Prices Set to Decline Amidst Inflation Concerns and Geopolitical Tensions, will it?
Highlights:
- Gold prices poised to decline on surprise US inflation, Fed rate cut speculations
- Geopolitical tensions escalate amid reports of active combat zones between Russia and Ukraine
- Recommended trading strategy: Sell on jump at $2167, target $2150, stop loss below $2178
Overview:
Gold prices are poised for a downturn after a four-week upward trend, driven by unexpected inflation spikes in the United States. The surprising inflation data has led to speculations that the Federal Reserve might delay or limit rate cuts, extending the timeline beyond June. Moreover, escalating geopolitical tensions between Russia and Ukraine add to the market's apprehension. Here's a detailed analysis of the current scenario and key economic indicators influencing gold prices.
Inflationary Pressures and Fed Rate Cut Speculations
The recent inflation readings in the United States surpassed expectations, fueled by rising costs of essentials like petrol and food. This development raises concerns about the resurgence of inflation and its potential impact on monetary policy. Investors are now reassessing their expectations regarding the Federal Reserve's stance on interest rates. The probability of a rate cut in the upcoming June meeting has decreased to 61%, reflecting a shift in market sentiment from the previously anticipated higher rate of over 75%.
Geopolitical Tensions Adding to Market Uncertainty:
Amidst economic concerns, geopolitical tensions between Russia and Ukraine intensify, with reports indicating active combat zones in border regions. Such geopolitical uncertainties often lead investors to seek safe-haven assets like gold, but the current situation appears to be influencing market dynamics differently.
Upcoming Economic Data Releases:
Investor attention is also directed towards key economic data releases, including the French Final CPI m/m, Italian Retail Sales m/m from Euro Zone, and Empire State Manufacturing Index, Prelim UoM Consumer Sentiment, Industrial Production m/m from the US Zone. These data points will provide further insights into economic trends and potential market movements.
Technical Analysis and Trading Strategy:
From a technical standpoint, gold prices are expected to find support around $2142, with resistance at $2178. Similarly, Gold MCX prices are anticipated to find support at 65260 and resistance at 66000. Based on this analysis, a trading strategy is recommended: sell on a jump around $2167, targeting $2150, with a stop loss set below $2178.
Conclusion:
In conclusion, gold prices are facing downward pressure amidst inflation concerns, potential shifts in Fed policy, and geopolitical tensions. Investors are advised to closely monitor economic indicators and geopolitical developments for insights into market movements. The recommended trading strategy provides a tactical approach to navigate the current volatility in gold prices.
Support and Resistance Levels:
