GOLD Analysis
Afternoon: Gold Hits Record High at $3,000 Amid Fed Rate Cut Bets and Trade War
Highlights:
- Gold surged to $3,000, marking a historic high due to risk aversion and Federal Reserve rate cut expectations.
- US-EU trade tensions intensified, with Trump threatening a 200% tariff on European wine.
- Strong central bank demand, especially from China, and ETF inflows further boosted gold prices.
Overview:
Gold prices soared to an unprecedented $3,000 per ounce, driven by escalating US trade tensions and increased expectations of Federal Reserve rate cuts. The sharp rally comes as investors seek safe-haven assets amid growing global uncertainties and a softer inflation outlook.
Key Drivers of the Rally:
- Escalation of US-EU Trade War:
- President Donald Trump threatened a 200% tariff on European wine and other alcoholic products after the EU imposed a 50% tariff on American whiskey.
- Rising tensions boosted demand for gold as a hedge against geopolitical risk.
- Federal Reserve Rate Cut Expectations:
- Recent PPI and CPI data indicated easing inflation pressures, giving the Fed more flexibility to lower interest rates.
- Lower rates reduce the opportunity cost of holding non-yielding gold, making it more attractive to investors.
- Central Bank and ETF Demand:
- China increased gold purchases for the fourth consecutive month, supporting the metal's bullish momentum.
- Strong ETF inflows further underpinned gold’s rally, with institutional investors increasing their holdings.
- Safe-Haven Demand Amid Uncertainty:
- Concerns over global economic slowdown and geopolitical risks added to the appeal of gold as a safe-haven asset.
Technical Levels:
- Support: $2,965 (Gold USD), 87,400 (Gold MCX)
- Resistance: $3,015 (Gold USD), 88,600 (Gold MCX)
Market Outlook:
Gold is expected to remain bullish, with strong demand from central banks, ETFs, and retail investors.
- Any dovish signals from the Fed or further escalation in trade tensions could push prices beyond the $3,015 resistance level.
- However, profit booking around current levels may cause temporary pullbacks.
Action Plan:
- Buy on dips near $2,980, targeting $3,010-$3,015, with a stop-loss below $2,970.
- For MCX traders, buy around ₹87,800, targeting ₹88,400-₹88,600, with a stop-loss at ₹87,400