Gold price dips over ₹1000 this week. Is this correction a buying opportunity?

Gold price today: After witnessing a bumpy ride throughout the week gone by, gold price on Multi Commodity Exchange (MCX) logged 2.20 per cent weekly loss and ended at 50,810 marks on Friday. Sharp impulse in dollar index and US Fed’s hawkish stance on interest rate hike amid rising fear of global inflation were among the major reasons for yellow metal slipping to its 10-month low in the international market. Spot gold price on Friday ended around $1,742 per ounce levels, giving breakdown at $1,780 levels in the week gone by.

According to stock market experts, spot gold price has given breakdown at $1,780 per ounce levels last week. They said that aversion in the yellow metal price was mainly triggered by sharp upside in dollar index, US Fed’s hawkish stance on interest rate hike and global inflation concerns. They said that the dollar index breached its resistance placed at 105.80 and went on to climb to its 20-year high of 107.78 levels that led to spot gold price slipping into $1,710 to $1,780 per ounce levels. They went on to add that MCX gold rates are currently trading in 50,400 of them 52,000 per 10 gm levels whereas 48,800 is the major support level for the precious metal.

Reason for dip in gold price

Highlighting the reasons for aversion in gold prices, Sugandha Sachdeva, Vice President — Commodity & Currency Research at Religare Broking Ltd said, “Gold prices witnessed a bumpy ride and slipped to a 10-month low in international markets during the week, only to recover some lost ground towards the end of the week. The Fed’s tightening cycle amid elevated inflation readings and the sharp impulse in the dollar index towards fresh 20-year highs led to a steep decline in gold prices.” She said that investors preferred the safe-haven dollar to gold and it breached the crucial resistance of 105.80, to march higher towards the 107.78 mark amid the non-stop chatter around the rate hikes by the key central banks.

The Religare expert went on to add that the US Fed’s June meeting minutes indicated that policymakers could front-load rate hikes to tame inflation, cementing expectations of another large rate hike at the forthcoming meeting. Data towards the close of the week indicated that the US economy added 372,000 jobs in June, almost 100,000 more than expectations and the unemployment rate stood at 3.6 per cent for the third consecutive month. This persistent labor market strength will further push the Fed to raise interest rates aggressively as it needs the labor market to cool down to suppress demand as well as inflation, which is likely to be a key headwind for gold.

Gold price outlook

Speaking on gold prices’ technical outlook, Anuj Gupta, Vice President — Research at IIFL Securities said, “Last week, gold price in spot market has given breakdown at $1,780 per ounce levels and it slipped to a new trade zone of $1,710 to $1,780 levels . Immediate support for spot gold rates are currently placed at $1,710 levels whereas its strong support is placed at $1,650 per ounce levels. In domestic market, MCX gold price is trading in the range of 50,400 of them 52,000 range whereas its strong support is placed at 48,800 levels.”

Expecting dollar index to continue weighing on the gold price in near term, Anuj Gupta of IIFL Securities said, “Last week, dollar index has breached its resistance placed at 105.80 levels and climbed to two decades high of 107.78 levels. Though, there was some profit-booking in forex market but gold price is expected to remain under pressure till dollar index is above 105.80 levels. So, gold investors are advised to wait and buy on lower levels as MCX gold price has been able to sustain above its 50,400 support levels.”

Speaking on gold price outlook, Sugandha Sachdeva of Religare Broking said, “While evaluating the near-term outlook, gold prices have breached the crucial support of $1780 per ounce in international markets, but are seen finding a lot of cushion around the $1720 per ounce mark, which led to some rebound in prices. As for the domestic markets, prices have drifted lower but the key support of 50,400 per 10 gm has been protecting the precious metal for more than a month now. We expect this recovery to continue as bargain buying is expected to lift prices, whereas, on the higher side, the level of 51,500 per 10 gm is likely to act as a rigid hurdle and restrict gains in the yellow metal.”

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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