Experts say Gold is awaiting more cues from the US monetary policy front this week
The price of gold on the Multi Commodity Exchange (MCX) started out lower on Wednesday at Rs 58,824 for 10 grammes and dropped to Rs 58,776 at the end of the day. Prices on the world market were roughly $1,937.26 per troy ounce. Silver’s price on the MCX fell to an intraday low of Rs. 70,302 on Wednesday after starting the day at Rs. 70,347 per kg. On the international market, the cost per troy ounce was almost $23.11.
The People’s Bank of China (PBOC) decreased interest rates, according to Anuj Gupta, vice president of IIFL Securities: “Yesterday gold prices closed lower by 0.54% Rs 58,820 levels. It is currently trading at $1936 per ounce on the global market.
This week, gold is awaiting additional clues from the US monetary policy front.
Technically, according to Gupta, there is strong support at Rs 58,700 and then Rs 58,400 levels. There is resistance at Rs 59,100 and Rs 59,500 levels. For today, one can sell with a stop loss of Rs 59,500 and a target of Rs 58,700-58500 levels around the Rs 59,100-59,200 levels. “Gold may test levels of $1,930 in international markets.”
In an effort to combat the slowdown in GDP following COVID-19, China’s central bank announced an interest rate reduction after taking a number of similar steps recently. Analysts claim that in order to preserve adequate liquidity in the banking sector, the PBOC lent banks 237 billion yuan ($33 billion) through the medium-term loan facility.
“Gold slipped in yesterday’s session on the back of positive US housing data, a firmer dollar, and US Yields, while traders looked to Federal Reserve Chair Jerome Powell’s testimony on Capitol Hill for cues on the trajectory of interest rates,” said Manav Modi, Analyst, Commodity and Currencies, MOFSL. May saw a jump in US single-family homebuilding to its highest level in over a year. The anticipation that high borrowing costs would discourage homeowners led to slightly lower expectations. The figures, however, indicated that domestic demand was sufficiently strong that the Fed would be inclined to raise interest rates even more in an effort to curb inflation.
According to the Fed Chair Powell’s statement on Wednesday regarding the twice-yearly reports to Congress on the state of monetary policy, which declare that inflation in significant sectors of the U.S. service industry is still high and has not showed any signs of easing, the markets are eagerly awaiting the information. According to anticipated new laws and people familiar with its objectives, pressure is rising on China’s cash-strapped local governments as authorities attempt to close a private funding path for their financing arms, increasing credit risks and default concerns. In addition to Governor Powell’s remarks, it will be crucial to keep an eye out for inflation statistics from the U.K. because it could cause volatility in the Dollar Index.