GOLD Analysis
Afternoon: Gold Under Pressure: Fed’s Hawkish Stance and Weakening Indian Demand Weigh on Prices
Highlights:
- Fed’s cautious outlook and strong US GDP data dampen gold’s appeal.
- Weakening Indian gold imports pose further downside risks.
- Key data releases, including US Core PCE and consumer confidence, may influence near-term market direction.
Overview:
Gold’s price trajectory remains under pressure due to the Federal Reserve’s hawkish monetary policy and declining physical demand in key markets like India. The Fed’s decision to slow its pace of rate cuts in 2024 has dampened the appeal of gold, which typically benefits from lower interest rates as it reduces the opportunity cost of holding non-yielding assets.
Revised US GDP data painted a picture of economic strength, particularly with consumer spending performing better than previously reported. This resilience supports the Fed’s position to proceed cautiously with policy easing, further weighing on gold’s upside potential.
On the demand side, India’s gold imports are expected to drop significantly in December, according to government forecasts. Rising domestic gold prices and muted consumer demand during the off-season are likely contributing to this decline. Weak demand from one of the largest gold consumers globally adds to the metal’s bearish outlook.
Economic Indicators to Watch
Investors will closely monitor the following key data for further clues on the macroeconomic landscape:
- German PPI (m/m): Insights into producer-level inflation trends in Europe’s largest economy.
- Euro Zone Consumer Confidence: Measures household sentiment amid economic uncertainty.
- US Core PCE Price Index (m/m): The Federal Reserve’s preferred inflation gauge, critical for policy decisions.
- US Personal Income (m/m): A reflection of consumer spending power and economic health.
- Revised University of Michigan Consumer Sentiment: An indicator of US household sentiment and spending outlook.
Technical Outlook
Gold prices remain capped within a key resistance zone of $2,618, while immediate support is seen at $2,580. A breach above resistance could signal a reversal, while failure to hold above support may accelerate downside momentum. On the MCX, prices face resistance at ₹77,100, with support anchored at ₹75,250.
Trading Strategy
Gold investors should adopt a cautious approach given the current macroeconomic backdrop.
- Buy on dips: Enter near $2,592 for a target of $2,616.
- Stop loss: Ensure strict risk management with stops placed below $2,580.
Market triggers: Watch for geopolitical developments and major economic data releases to refine short-term strategies.
Support and Resistance Levels:
