Informist, Tuesday, Aug 6, 2024
By Sandeep Sinha
MUMBAI/NEW DELHI – The uptrend in gold prices is likely to continue this month, with the commodity expected to scale fresh highs in international markets due to safe-haven demand and rising expectations of the US Federal Reserve cutting interest rates in September. A recent spate of weak US economic data pushed the dollar index to the lowest level since January, which also increased demand for non-yielding assets such as gold. The dollar index, which measures the strength in the greenback against a basket of major currencies, was at 102.87 earlier today.
On the Multi Commodity Exchange of India, October gold futures are seen at 68,400-72,000 rupees per 10 gm this month, according to the median of the estimates from 17 brokerage houses polled by Informist. On the COMEX, prices are seen at $2,384-$2,539 an ounce.
"Gold prices continue a winning streak above 70,000 rupees (per 10 gm), getting support due to risk-off sentiment in the market. Treasury yields have been falling sharply since last week, when the Federal Reserve kept the policy rate in its current 5.25-5.50% range and (Fed) Chair Jerome Powell hinted at a rate cut in September," Prithviraj Kothari, managing director at RiddiSiddhi Bullions Ltd, said. "However, after July data showed that the unemployment rate jumped, sparking chatter that the US economy may be heading for a recession, and expectations for rate cuts deepened."
The killing of Hamas leader Ismail Haniyeh in Iran and Hezbollah commander Fuad Shukr in Beirut last week raised the possibility of escalating conflict in the geopolitically volatile West Asia, which is also aiding the gold's safe-haven appeal.
The most-active October gold contract on MCX was last at 69,339 rupees per 10 gm and the same-month contract on the COMEX was at $2,426.8 an ounce. On Jul 17, gold hit all-time highs of 74,731 rupees per 10 gm on the MCX and $2,488.80 an ounce on the COMEX.
"Gold on the upside can go up to $2,500-$2,560 an ounce. Due to deterioration of US economic data, the rate cut expectations are increasing. A slowdown is seen in the US, China and other major economies. Japan has increased interest rates after 30 years. So all these factors have reached the board," Kunal Shah, head of commodities research at Nirmal Bang, said.
Data released by the US Bureau of Labor Statistics on Friday showed that non-farm payrolls in July came in at 114,000, much lower than market expectations. Analysts polled by Dow Jones estimated payrolls at 185,000 last month from 206,000 in June.
According to CME FedWatch, Fed fund futures now indicate a 74% chance of a 50-basis-point interest rate cut at the central bank's September meeting, with a cut of 155 bps expected this year and a similar amount in 2025. Gold holdings with SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose by 17 tn to 946.05 tn in July as investors switched to safe-haven assets.
However, the cooling demand from global central banks and slowing retail demand in China and India at higher levels may limit the sharp upside in the yellow metal. Demand for gold from central banks fell to 183.4 tn in Apr-Jun, down from 299.9 tn in Jan-Mar, the World Gold Council said in its latest Gold Demand Trends report.
Finance Minister Nirmala Sitharaman on Jul 23 in the Budget for 2024-25 (Apr-Mar) announced a cut in the basic customs duty on gold and silver from 15% to 6%, which led to a sharp fall in gold prices. This attracted retail buying in the physical market, but the momentum fizzled out as the price of the yellow metal remained high in domestic markets.
Investors will take cues from the Reserve Bank of India Monetary Policy Committee meeting's outcome, minutes from the Federal Open Market Committee's latest meeting, the US consumer price index data, US preliminary GDP data for Apr-Jun, and the Jackson Hole Symposium during the month.
Following is a summary of the poll by Informist on gold prices in August and details of estimates by respondents, in alphabetical order:
| Brokerages | MCX support | MCX resistance | COMEX support | COMEX resistance |
|---|---|---|---|---|
| Angel One | 62,400 | 78,000 | 2,215 | 2,770 |
| Axis Securities | 68,500 | 71,000 | 2,370 | 2,480 |
| BlinkX by JM Financial | 69,700 | 71,200 | 2,470 | 2,550 |
| Finlit Consulting | 68,000 | 72,000 | 2,440 | 2,530 |
| HDFC Securities | 69,050 | 71,600 | 2,410 | 2,540 |
| ICICI Securities | 68,000 | 72,200 | 2,380 | 2,550 |
| Kedia Comtrade | 69,500 | 71,600 | 2,380 | 2,540 |
| Kotak Institutional Equities | 67,400 | 75,000 | 2,375 | 2,520 |
| LKP Securities | 68,100 | 72,000 | 2,425 | 2,560 |
| Mehta Securities | 68,500 | 73,500 | 2,370 | 2,510 |
| Motilal Oswal | 68,400 | 72,500 | 2,370 | 2,650 |
| Nirmal Bang Equities Pvt Ltd | - | - | 2,440 | 2,550 |
| Prithvi Finmart | 67,650 | 71,200 | 2,388 | 2,535 |
| Reliance Securities | 67,800 | 74,168 | 2,300 | 2,650 |
| RIDDISIDDHI BULLIONS LIMITED | 69,000 | 71,000 | 2,400 | 2,520 |
| SMC Global | 68,500 | 72,300 | 2,410 | 2,530 |
| Sharekhan by BNP Paribas | 68,700 | 71,700 | 2,438 | 2,520 |
| Vijay Bhambwani | 66,470 | 75,866 | 2,368 | 2,537 |
| Median | 68,400 | 72,000 | 2,384 | 2,539 |
End
US$1 = 83.95 rupees
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