gold, mcx gold, comex


By Bhavik Patel

It was carnage for gold this week as from $1835, gold fell till $1737 on back of recession fears. The US Dollar index hit 107, the highest in 20 years. Capital inflows in USD created headwinds for all commodity assets. Gold market is mostly at the mercy of the U.S. dollar, which is in an extraordinary uptrend. The drop in oil prices has helped to temporarily cool some fears that inflation pressures will continue to spiral out of control, which is a negative for the gold market.  

Right now, the fears of recession and lower consumer and commercial demand for metals is trumping the historically bullish aspects of higher inflation being supportive for the metals.  It is difficult to figure out that gold has found bottom or it is a momentary lull of selling pressure. Market participants will wait for next key reports of inflation and jobs data before concluding that. First key report of jobs is today and the next key CPI inflation report is next week. The US Fed is expected to increase the interest rate by 75bps. The US economy has deteriorated as consumer confidence data came lower. If the US Fed indeed raises the rate by 75 bps then expect selling pressure in gold to continue unless the US Fed becomes less hawkish or inflation subsides.

In MCX, gold has yet to breach its 50000 support level while in COMEX, it has already breached its support of $1786. Weak Indian rupee and import duty of 5% has saved prices in MCX from falling. In COMEX, gold has support in the range of $1732 till $1708. Recently gold has bounced back from its support of $1732 so there is hope of consolidation if prices hold above this level. But the trend has changed from neutral to negative in COMEX while in MCX it is still neutral due to prices above its key support level of 50000. 

For next week, prices of 50000 remain important and if prices breaches below that level then a short position can be added with stoploss of 50800 and target of 49000. RSI_14 is still neutral at 47 so there is plenty of room on the downside if gold breaks.  

We would also recommend investors to wait out for the report of CPI before taking any positional trades as the market seems to be waiting for fresh triggers. Sell off in gold has slowed down at the moment and we are neither witnessing any sharp short covering or fresh shorts indicating indecision in the market.

(Bhavik Patel, Commodity & Currency analyst, Tradebulls Securities. Views expressed are the author’s own.)


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