By Bhavik Patel
Gold is bouncing from the lows of $1800 however the total pattern nonetheless is bearish. Small bounce may be as a result of gold costs are buying and selling close to an oversold area however buyers are reluctant to take lengthy positions when fundamentals level to decrease costs. Rally in US greenback and treasury yields are offering a lid to gold costs. The whole premium from the battle between Russia and Ukraine has been eroded away and even when battle worsens, we might not see any spike in costs as buyers are targeted on inflation and better rates of interest.
Precious steel may proceed to battle because the U.S. greenback trades round its highest stage in 20 years. The widening hole in world financial coverage, with the Federal Reserve main the cost on rate of interest hikes, is supporting the U.S. greenback’s present rally. There are rising expectations that the Federal Reserve will increase rates of interest by 50-basis factors on the subsequent three financial coverage conferences. This has made US Treasury yield engaging and buyers are discovering security within the US bond market as an alternative of gold. Historically we have now seen that every time the US Fed raises rates of interest aggressively, gold costs have suffered but when the US Fed has raised rates of interest slowly, gold has outperformed. The present situation is the prior one so we’re seeing gold costs struggling.
The US Fed is concentrated on bringing inflation down even when the US economic system struggles. One of the the reason why gold and silver have seen vital promoting strain within the final 4 weeks is as a result of buyers have religion that central banks can engineer a gentle touchdown that may weaken the economic system sufficient to slow-growing inflation pressures however not sufficient to push it right into a recession. But actuality is with rising rates of interest, there will likely be recession because the economic system was up due to stimulus and there’s extra ache down the road. Ground actuality is the world economic system is struggling due to excessive crude oil costs. We consider long run, the US Treasury will likely be greatest performing asset adopted by gold.
In MCX, weak INR has given some assist to gold costs however nonetheless it’s struggling to remain above 50000 ranges. RSI_14 is at 40 after bouncing from the lows of 36 however in COMEX, RSI_14 traded on the oversold area of 30 earlier than bouncing again. Prices are underneath the 20 and 50 day transferring common indicating the pattern is bearish. 51000 is the resistance and 49000 is the assist the place the 200 day transferring common is. Next week we anticipate costs to commerce sideways to bearish. Investors ought to wait earlier than taking lengthy positions. Any bounce again will likely be weak and succumb to promoting strain. Reversal will solely come above 51500 ranges.
(Bhavik Patel, Commodity & Currency analyst, Tradebulls Securities. Views expressed are the creator’s personal.)
Source: www.financialexpress.com”