The gold market is on edge! With prices fluctuating, investors are wondering: Will the precious metal's value continue its downward trend?
Praveen Singh, Senior Analyst at Mirae Asset Sharekhan, advises a strategic approach. Despite recent dips, he suggests buying gold on dips, as December rate cuts are still a possibility, and multiple factors keep gold well-supported.
Gold's Recent Performance:
- Spot gold had a turbulent week ending November 14, plunging 2.64% in the last two days due to Fed rate uncertainty, yet it managed a weekly gain of 2%, closing at $4,084.
- The surge to $4,245 on November 13 was fueled by inflation fears, as the US Treasury Secretary hinted at potential $2,000 tariff rebate checks for Americans earning under $100,000 annually.
- However, uncertainty regarding the Fed rate cut in December triggered a sell-off, exacerbated by opposing views from Fed officials and US data fog due to the government shutdown.
Market Insights:
- At the time of writing, gold traded at $4,080, down 0.1% as investors awaited US data. The MCX December gold contract reflected this dip, down 0.44%.
- US Empire manufacturing data for November beat expectations, while China's October retail sales rose but fell short of industrial production and fixed asset investment forecasts.
- The US Dollar Index hovered around 99.45, and 2-year US yields remained steady, while 10-year yields dipped.
- Global gold ETF holdings increased by 0.15 MOz for the week, but were down from the cycle peak. Nonetheless, YTD holdings are near a 3-year high.
- COMEX Gold eligible inventory has decreased since April due to tariff volatility.
Fed Officials' Comments:
- US Federal Reserve Vice Chair Philip Jefferson warned of increased employment risks but advised against a December rate cut as interest rates near neutral.
- Several Fed presidents opposed December rate cuts due to high inflation, while Mary Daly suggested waiting for more data. Minneapolis Fed President Kashkari considers the current 3% inflation rate too high.
Geopolitical Tensions:
But here's where it gets controversial... China-Japan relations are strained due to Japan's PM Sanae Takaichi's remarks on potential military action in a Taiwan conflict. This statement may not be retracted, indicating prolonged tensions.
- Taiwan's distribution of civil defence handbooks to households highlights the potential for emergencies, including a Chinese attack.
Upcoming Data Releases:
- US data releases include ADP weekly employment, import/export price indices, industrial production, and more. The October job report will exclude the unemployment rate, and the October CPI report may not be released, complicating the Fed's decision-making.
- Eurozone and UK CPI and PMIs will also be in focus.
Outlook and Trading Strategies:
- China-Japan tensions and underwhelming Chinese data are positive for gold.
- US tech earnings and the September nonfarm payroll report will be crucial.
- The probability of a December Fed rate cut has decreased significantly, which is bearish for gold.
- Gold is expected to trade in a range before these reports, but rate cut probabilities can shift rapidly with US data and official comments.
- Singh reiterates the strategy of buying on dips, emphasizing the possibility of December rate cuts and gold's strong support.
- Technical levels: Support at $4050, $4000, and $3936, with resistance at $4160, $4200, and $4260.
Silver Market:
- Silver had a volatile week, testing strong resistance at $55 but facing rate cut uncertainty, resulting in a 7% dip. Despite this, it closed the week up 4.67% at $50.58.
- Spot silver is trading at $50.91, up 0.6% at the time of writing.
- Global silver ETF holdings increased by 6 MOz last week, a positive sign.
- Improved risk appetite due to tech earnings may support silver.
- Technical levels: Support at $50, $49.30, and $47.50, with resistance at $52.30 and $55.
- Buying on dips is recommended unless gold or risk assets experience sharp declines.
A potential US-India trade deal could impact the Indian Rupee, indirectly affecting domestic precious metal prices.
What's your take on the gold market's future? Do you agree with Praveen Singh's analysis and trading strategy? Share your thoughts and let's discuss!
