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Gold has been losing its appeal as a safe haven on inflationary fears and continuance of a higher interest rate regime in the US for much longer than anticipated, commodity and currency expert Anuj Gutpa said. This is strengthening the dollar index while raising bond yields, he said, expecting gold and silver to trade sideways next week amid strong resistance at higher levels. Gupta is Head Commodity & Currency at HDFC Securities.
Echoing a similar view, Praveen Singh, Vice President, Fundamental Currencies and Commodities, Sharekhan by BNP Paribas said that gold is left with limited upside and traders can expect it to trade in the range $1,865-$1,930. In the absence of a news-based stimulus, it is unlikely that a spurt of buying would happen that could take gold prices higher, Singh said.
MCX Gold futures have corrected 5.6% or Rs 3,467 from its April highs of 61,845 though they are still trading up 6.10% or by Rs 3,358 on the year-to-date basis. In August, the gold prices corrected 2% or by Rs 1,193 per 10 gram.
The correction has been on the back of 0.57% gains in the dollar index (DXY) in five sessions while a jump of 2.34% in a month. Gold price movement is directly related to the movement in dollar and any appreciation in the greenback dents the prospects of the non-yielding bullion. USD also has a bearing on the imports of dollar-priced commodities. The DXY is currently hovering above the 103 mark against a basket of six top currencies.
“Gold’s got a problem where it’s competing with instruments that are yielding 4-5%”, such as bonds while gold yields nothing in comparison, said Chicago based analyst Phillip Streible. “It just does not seem like an ideal asset class in the current environment,” a Reuters report said quoting Streible who is Chief Market Strategist at Blue Line Futures.
Meanwhile, Saxo Bank’s head of commodity strategy Ole Hansen suggested that gold could continue to struggle until something breaks, either through a credit event, a weaker dollar, or the belief of the FOMC towards cutting rates.Gupta’s advice to traders is to buy gold around Rs 58,000 levels with the stop loss of 57,500 levels and target of Rs 58,700 and then Rs 59,000. On Friday, October Gold futures ended at Rs 58,378, up by Rs 88 or 0.15% over the Thursday closing price.
As for September Silver futures, buying can be done around Rs 69,500 levels with the stop loss of Rs 68,400 and the target of Rs 71,500 – Rs 72,000. Silver futures have gained 1.18% or by Rs 822 per kg during this year while declining nearly 7% or by Rs 5,192 in August.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
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