GOLD Analysis
Afternoon: Gold Market Awaits US Inflation Data Amid Mixed Sentiments
Highlights:
- Traders eye US inflation data for clues on Fed’s monetary policy.
- Record-high prices in India dampen festival season demand despite lower import duties.
- Gold facing support at $2590 and resistance at $2635 per ounce.
Overview:
Gold prices have fluctuated recently due to varying expectations about the Federal Reserve’s upcoming interest rate decisions. As of now, the market remains steady as investors await inflation data from the US, which will likely shape the Fed’s stance on monetary easing. September’s Fed meeting minutes suggest that a significant number of officials are leaning towards a half-point rate cut as a starting point for easing. However, further moves will depend on inflation reports like the one due today, as well as employment and growth data. With economic indicators remaining mixed, the direction for the next rate cut remains uncertain.
Higher inflation tends to support gold prices because it reduces the purchasing power of currency and enhances the appeal of safe-haven assets like gold. However, rate cuts generally reduce the opportunity cost of holding non-yielding assets like gold, pushing prices higher. Traders are thus balancing both inflation expectations and the Fed’s future actions in their outlook.
Physical Gold Market in India
In India, the world’s second-largest gold consumer, the situation is more complex. Even with the government reducing the import duty on gold to its lowest level in a decade, high prices have subdued demand during what is usually a high-demand festival season. Gold prices have soared in recent months, making purchases difficult for price-sensitive consumers in the country, even though the festival season often triggers higher buying. This slump in demand could lead to a shortfall in sales, affecting retailers and manufacturers alike.
India's bullion industry had been optimistic about a resurgence in demand, thanks to the reduction in import duties. However, this optimism has been dampened by global price levels that have left many buyers on the sidelines. For the gold market in India, further price adjustments may be needed to rekindle consumer interest.
Technical Outlook
From a technical perspective, gold prices face key levels. Support is expected around $2590, while resistance may be encountered at $2635. On the MCX, gold prices may find support at ₹74,600 and resistance at ₹75,300.
Action Plan:
Traders looking to profit from short-term price movements can consider selling around $2618, targeting a move towards $2602, with a stop-loss placed above $2630 to manage risks.
Conclusion
Gold traders remain in a waiting period ahead of US inflation data, which is expected to provide key insights into the future of the Federal Reserve's monetary policy. Meanwhile, the physical market in India grapples with high prices that have curtailed demand during the festival season. In the short term, gold prices will continue to be influenced by both economic data and geopolitical events, especially as inflationary pressures and potential rate cuts come into clearer focus.
Support and Resistance Levels:
