Gold prices saw an uptick in morning trade in the domestic futures market on Wednesday, July 10, reflecting the trends in the international markets. Investors were eagerly anticipating key US inflation data to gauge the future direction of US interest rates.
Investor optimism that the US Federal Reserve might start cutting interest rates in September this year, following comments from Fed Chair Jerome Powell acknowledging easing inflation, provided support for gold prices.
In his testimony to the Senate on Tuesday, Powell noted the moderation in inflation but stated that the central bank required more data to be confident about the diminishing inflation trajectory.
Powell emphasized the risks associated with maintaining elevated interest rates for an extended period during his testimony. The Fed Chair is scheduled to address Congress on Wednesday.
Simultaneously, the eagerly awaited US consumer price index (CPI) data for June is set to be released on Thursday. Analysts anticipate a slight uptick of 0.1% month-on-month and 3.1% year-on-year. The Fed’s target is to keep inflation below 2%.
MCX Gold for August delivery was trading 0.33% higher at ₹72,636 per 10 grams around 12:30 pm.
Gold has experienced significant gains this year on the back of expectations of rate cuts, political uncertainties, and robust buying of the yellow metal by major global central banks.
“The Fed Chair is closely monitoring economic data points as he acknowledged that keeping rates excessively high could impede economic growth. Updates on geopolitical tensions in the Middle East are also adding a risk premium to the market,” stated brokerage firm Motilal Oswal.
What should be your strategy for MCX Gold today?
Gold prices are likely to hold steady on Wednesday in anticipation of Powell’s testimony before Congress and the US inflation data release on Thursday.
Motilal Oswal anticipates gold to trade within a range of ₹72,200-73,000, with support at ₹72,300-72,100 and resistance at ₹72,750-72,925.
According to Saish Sawant Dessai, a base metals analyst at Angel One, gold prices may remain stable as investors await US inflation data for insights into future interest rate adjustments.
“Support levels for gold are situated at ₹72,970-72,610, while resistance levels are seen at ₹72,650-72,940,” noted Sawant.
MCX Gold for August is expected to maintain the critical support of the 10-day EMA (exponential moving average) at ₹72,100 and trend towards ₹72,800. Surpassing ₹72,800 could pave the way for ₹73,200, according to ICICI Direct.
“The focus now shifts to the US inflation report, which will provide more clarity on the timing of the first interest rate cut in the US. Any indication of moderation in the inflation figures would increase the likelihood of a rate cut in September. Furthermore, an increase in holdings by physically backed gold ETFs would also bolster the market’s confidence in gold,” stated ICICI Direct in a note.
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Disclaimer: The views and recommendations mentioned above belong to individual analysts, experts, and brokerage firms, not Mint. We urge investors to seek advice from certified experts before making any investment decisions.
Additional Insight:
Adding additional context on how geopolitical tensions and changes in the US interest rates can impact the gold market would provide a more comprehensive understanding of the factors influencing gold prices. Additionally, discussing the historical correlation between gold prices and inflation data could offer valuable insights for investors considering gold as an asset in their portfolio.
