GOLD Analysis
Afternoon: Gold Prices Hold Steady Amid Stronger Dollar and Rising Bond Yields
Highlights:
- Gold prices held steady between 71,235 and 71,985 INR per 10 grams, pressured by a stronger U.S. dollar and rising bond yields.
- U.S. PCE inflation data met expectations, dampening hopes for a substantial 50 basis point rate cut by the Federal Reserve.
- Indian and Chinese gold dealers increased discounts to boost demand amid tepid buying conditions.
Overview:
Gold prices traded within a narrow range, with the day’s trading range set between 71,235 and 71,985 INR per 10 grams. The precious metal faced pressure from a stronger U.S. dollar and rising bond yields, both of which tend to make non-interest-bearing assets like gold less attractive to investors.
Recent economic data from the United States has influenced gold’s performance. The July report showed that both headline and core Personal Consumption Expenditures (PCE) prices increased by 0.2%, meeting market expectations. However, the annual PCE inflation rates remained unchanged, contradicting forecasts that anticipated a rise. This data has tempered expectations of a substantial 50 basis point rate cut by the Federal Reserve in September, aligning with the broader view that the U.S. economy remains resilient despite higher interest rates. The Federal Reserve's cautious stance and data-driven approach suggest that while rate cuts may be on the horizon, they might not be as aggressive as some market participants had hoped.
Market Dynamics: Discounts Widen in Key Markets
Gold's trading dynamics were also influenced by activity in key Asian markets. Indian gold dealers widened their discounts to $8 per ounce, marking a six-week high. This increase in discounts is seen as an effort to stimulate demand amidst tepid buying. In China, the world’s largest gold consumer, dealers offered discounts ranging between $1 and $10 per ounce on the international spot price, reflecting similar market conditions.
Conclusion and Outlook
The mixed economic signals and varying discount levels in major gold markets have kept gold prices relatively stable. The interplay of a stronger dollar, rising bond yields, and global economic data will continue to influence gold's price trajectory in the near term. Investors are closely watching the Federal Reserve’s upcoming moves and any changes in global economic indicators, which could provide more clarity on gold’s future direction.
Action: Buying from 2505 targeting 2515 which invalidates below 2495 is the advice for the day.
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