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Business News/ Markets / Commodities/  Gold price retraces from record high on US Fed's rate hike buzz. Buy or wait?

Gold price retraces from record high on US Fed's rate hike buzz. Buy or wait?

Gold rate today has immediate support placed at ₹59,500 on MCX whereas in international market it has immediate support at around $1,975 mark

US dollar rate may continue to dictate gold price in near term, believe experts. (Reuters)Premium
US dollar rate may continue to dictate gold price in near term, believe experts. (Reuters)

Gold rate today: On account of US Fed's rate hike buzz, gold price retraced more than 1,400 from its life-time high of 61,371 per 10 gm on Multi Commodity Exchange (MCX). Gold future contract for June 2023 on MCX finished at 59,945 levels on Friday. In international market, the precious yellow metal ended at $1,989 per ounce levels after flirting with psychological $2,000 level ahead of the weekend sessions. However, the stupendous rally in precious metal continued for the second consecutive month where prices gained around 0.50 per cent.

According to commodity market experts, gold price today has support placed at $1,975 and $1,950 levels whereas it is facing hurdle at $2,010 and $2,030 levels. On MCX, gold price today has support placed at 59,500 and 58,700 per 10 gm levels whereas it is facing resistance at 60,500 and 61,200 per 10 gm levels. They said that higher than expected US inflation and labour data has put pressure on the US Federal Reserve to raise interest rate and market is buzzing with speculation that US Fed may declare 25 bps interest rate hike in upcoming FOMC meting. However, they maintained that US dollar rate will continue to dictate gold prices and advised investors to maintain 'buy on dips' strategy as $1,960 to $1,950 is looking good support zone for fresh long positions.

US Fed rate hike buzz

Speaking on the reasons that led to fall in gold prices across world, Nirpendra Yadav, Senior Commodity Research Analyst at Swastika Investmart said, "Gold prices have been under pressure for the past three weeks as US inflation remained higher than expected and there was a decline in unemployment claims data, which has raised hopes of another interest rate hike at the upcoming Fed meeting scheduled for May 2–3 this week. a fresh bet on an interest rate hike after the banking turmoil in the USA, putting pressure on precious metals prices."

However, Nripendra Yadav maintained that fears of an economic slowdown due to the ongoing insurgency in Sudan, pressure in the global economy due to high-interest rates and high inflation, contracting GDP, and weak manufacturing PMIs limited the losses in the precious metal. US personal consumption expenditure recorded a better-than-expected reading, and an unexpected drop in jobless claims kept gold prices marginally lower.

"The US Fed has already signaled that it is willing to risk a mild recession to curb high inflation. The central bank is widely expected to hike interest rates by 25 basis points at next week's meeting, and markets will be closely watching for further signals on monetary policy," Yadav said.

US dollar in focus

Asking gold investors to remain vigilant about the US Fed news, market expert Sugandha Sachdeva said, “Hawkish signals from various Fed officials reiterating the need for further rate hikes ahead of the US central bank’s meeting next week has led to a lot of concerns about tighter liquidity conditions, underscoring the weakness in gold prices."

On other than US Fed rate hike factor that pulled down gold prices, Sugandha Sachdeva said, "Retreat in the dollar index from multi-month lows and a revival in “risk on" sentiments have weighed on the asset largely viewed as a safe haven. The latest data indicated persistent price pressures in the US as the reading of personal consumption expenditure prices was higher than expected during the first quarter of 2023, raising concerns that Fed may not be ready to pause its most aggressive rate hike cycle in 40 years. The precious metal will likely witness significant volatility around the key event and take further cues from signals about the future monetary policy path."

Gold price outlook

On major levels in regard to gold rates today, Anuj Gupta, Vice President — Research at IIFL Securities said, "Overall bias for gold is still bullish and gold investors are advised to maintain buy on dips strategy in current correction. Gold rate today has immediate support placed at $1,975 whereas major support for the yellow metal is placed at 1,950 per ounce levels. I believe that US dollar would continue to dictate gold price movement and Dollar Index is not going to sustain long above 100 levels. It may come to the tune of 98 odd levels by end of current quarter."

"Once the gold price comes out of the base building mode, we can expect gold prices to hit $2,010 and $2,030 levels in international spot market soon. On MCX, 60,500 and 61,200 should be the target for those who mulling to indulge in bottom fishing," said Anuj Gupta of IIFL Securities adding, "For bottom fishing 58,700 to 59,000 would be a good supply zone for bottom fishing."

On support zone for bottom fishing in international market, Amit Sajeja, Vice President — Research at Motilal Oswal said, "Gold price has a good support zone of $1,960 to $1,950 and one can do the bottom fishing in this zone maintaining stop loss around $1,930 per ounce levels."

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

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Asit Manohar
Chief Content Producer at Live Mint Digital Team
Catch all the Commodity News and Updates on Live Mint. Download The Mint News App to get Daily Market Updates & Live Business News.
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Updated: 29 Apr 2023, 11:53 AM IST
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