By Bhavik Patel
Gold costs are close to to its help of $1800. Breach under that might open doorways to $1750. This week the US greenback has been robust because the US CPI got here increased than anticipated and employment numbers got here robust indicating that the US Fed will keep their aggressive financial tightening and fee hikes. This pushed traders into security of US greenback and US Treasury yields. USD is buying and selling at 20 12 months excessive whereas US Treasuries are buying and selling at 3 12 months excessive. Many of the rising market currencies are buying and selling at all-time low towards USD. The greenback has firmly put gold within the hazard zone and a break of the $1,800 stage may result in additional technical promoting.
The broad market selloff is making a liquidity vacuum, which is hurting gold. The markets are at present pricing in a 93% likelihood of an extra 50-bps hike in June and a 90% likelihood of one other 50-bps hike in July, in line with the CME FedWatch Tool. Inflation is anticipated to stay excessive and thus the Fed stays below strain to lift rates of interest considerably.
Bears have the agency total near-term technical benefit and bulls would solely be in cost above $1900. There are headwinds for gold within the type of robust USD and Fed’s rate of interest hike. We don’t see in close to time period any catalyst for gold to shoot increased until sharp quick protecting comes. This is the fourth consecutive week the place hedge funds lowered their bullish bets on gold and elevated their quick publicity. Gold isn’t the one valuable steel struggling. Hedge funds additionally proceed to liquidate their bullish silver bets and enhance their quick positioning. We may see some quick protecting in close to time period as gold and silver each are close to oversold areas however they don’t seem to be out of the woods. It could be secure to attend for some bounce earlier than shorting however shorting from present worth doesn’t justify the danger/reward ratio.
RSI_14 in MCX on the each day chart is at 37 so there’s room for correction as now we have seen traditionally that gold bounces off briefly from 30 ranges. At the time of writing gold is simply shy above 50000 and that help was anticipated to carry however within the coming week, it would get breached. On the draw back, now subsequent help comes round 49200 and 48850 the place the 200 day shifting common is. The 20 and 50 day shifting common has given a promote crossover so we anticipate costs to stay below strain. Investors and merchants ought to look forward to additional correction earlier than venturing to purchase. Any upside subsequent week needs to be seen with warning because it is perhaps quick protecting since big quick positions has been taken by cash managers. So look forward to some bounce earlier than taking quick positions whereas traders searching for purchase on dips ought to look forward to ranges of 48850.
(Bhavik Patel is a commodity and forex analyst at Tradebull Securities. Views expressed are the writer’s personal. Please seek the advice of your monetary advisor earlier than investing.)
Source: www.financialexpress.com”