GOLD Analysis
Afternoon: Gold Prices Steady Amid Expectations of US Interest Rate Decrease
Highlights:
- Traders expect a Fed rate cut as US producer prices rise less than expected.
- Market focus shifts to upcoming US inflation report for Fed policy clues.
- SPDR Gold Trust holdings increase, signaling continued confidence in gold
Overview:
Gold prices remained steady as weaker-than-expected US producer prices bolstered expectations of an imminent interest rate cut by the Federal Reserve. The US producer prices rose less than anticipated in July, reinforcing market beliefs that the Fed will ease monetary policy to combat slowing inflation. Market participants are now turning their attention to the forthcoming US inflation report for further clues on the Fed's next move.
The US consumer price index (CPI) data for July, set to be released on Wednesday, is projected to show a month-on-month inflation increase of 0.2%. This anticipated rise in inflation has further cemented the belief among traders, as indicated by the CME FedWatch Tool, that the US central bank will lower interest rates by 50 basis points in September, with an additional cut expected in December. This outlook has been pivotal in sustaining gold prices, as lower interest rates reduce the opportunity cost of holding non-yielding assets like gold.
Adding to the cautious optimism, SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, reported a 0.34% increase in its holdings, rising to 849.79 metric tonnes on Monday from 846.91 tonnes on Friday. This increase in holdings signals continued confidence in gold as a safe-haven asset amid economic uncertainties.
In terms of technical analysis, gold prices are expected to find support at $2435 and face resistance at $2485. On the MCX, gold prices are anticipated to get support at ₹70,300 and resistance at ₹71,200.
Key economic data slated for release includes Flash GDP q/q and Industrial Production m/m from the Euro Zone, as well as Core CPI m/m, CPI m/m, and CPI y/y from the US Zone. These indicators will be crucial in shaping market expectations and guiding future investment decisions.
- Traders anticipate a Fed rate cut as inflation data points to a modest increase; SPDR Gold Trust holdings rise, reflecting investor confidence.
- Upcoming key economic data includes GDP and industrial production from the Euro Zone and CPI figures from the US, expected to influence market dynamics.
Action:
Buying on drop till pivot level 2465 is advised targeting 2474 (1st Resistance) and 2484 which invalidates below 2455 (support)
Support and Resistance Levels:
