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MCX Gold trend neutral amid weak Rupee; investors looking to make fresh entry may go long

The gold market has been overwhelmed by the relentless strength of the dollar during September and the start of October. Gold breached $1700 this October and is currently trading at $1668. Yesterday with year-on-year US inflation coming higher than expected, we saw a knee-jerk reaction where gold witnessed a sharp selloff. The reason was anticipation that Fed will continue to push rates higher to bring inflation under control. But gold along with equity assets reversed its course and ended in the green. Many financial metrics are flashing red. Five-year charts show major currencies, including the Yen, Pound, Dollar, and Yuan are at extremes.

One of the reasons we might see the Dollar index retreat is despite a stronger-than-expected inflation number, the currency failed to go up and reversed its course meaning the market is starting to discount every bad news. The CME’s probability indicator is forecasting that there is a 99.3% probability of a 75-basis point rate hike in November. The CME’s FedWatch tool is predicting that this will be followed by a 71.6% probability of another 75-basis point rate hike in December which would take Fed funds rates between 450 – 475 basis points by the end of the year.

This all bears bearish for gold and silver while bullish for US Dollar. However, the rally in USD has been overextended and both gold and silver are in the oversold region in COMEX. So yesterday’s recovery could be some short covering but we will have to wait and see if the turnaround seen yesterday sustains for at least 2-3 trading sessions. In MCX, gold’s trend is neutral due to the weak Indian Rupee while in COMEX, the trend is bearish. In MCX, gold is near its 20,50, and 200-day moving averages.

In Oct, gold had witnessed a buy crossover from 20 and 50-day moving averages when gold rallied till 52120. However, despite the pullback in prices from 52120 to 50850, the buy crossover still remains valid. RSI_14 is above 52 which is again a bullish sign. If we take a recent swing low of 48950 and a recent high of 52120, a 50% retracement comes at 50500. Yesterday’s low was at 50400 and gold rallied from that point. So clearly the buying trend will come under threat below 50400 and any long position can be exited below that. However, buyers looking to make fresh entries can go along with a closing basis stop loss of 50400 and an expected target of 51400.

Eqwires Research Analyst

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Russian rouble moves away from over three-month low vs dollar

The rouble moved away from a more than three-month low against the dollar on Thursday, strengthening back past the 64 mark, with Russian markets still buffeted by geopolitics as the conflict in Ukraine continued.

At 0730 GMT, the rouble was 1.2% stronger against the dollar at 63.68, pulling away from a low of 64.9275 hit on Wednesday, its weakest point since July 6.

It had gained 0.5% to trade at 62.46 versus the euro. It had shed 0.4% against the yuan to 8.71 .

The rouble is the world’s best-performing currency this year, supported by capital controls and slumping imports after Western governments unloaded hefty sanctions on Russia, while scores of foreign companies paused operations in the country.

The recent escalation in Ukraine is likely to weigh on risk appetite, analysts have said.

Promsvyazbank analysts attributed the rouble’s gains on Thursday to some overheating in the market and some participants’ tendency to lock in short-term profits.

The rouble has been weakening in recent sessions due to the reduced supply of foreign currency from export-focused firms, who will only begin preparing for this month’s tax payment period from next week, Banki.ru Chief Analyst Bogdan Zvarich said.

Investors were also keeping an eye on U.S. consumer price data, due later on Thursday, that could shed light on the pace of Federal Reserve policy tightening.

Brent crude oil, a global benchmark for Russia’s main export, was up 0.5% at $92.9 a barrel.

Russian stock indexes were mixed.

The dollar-denominated RTS index was up 1.1% to 965.3 points. The rouble-based MOEX Russian index was unchanged at 1,951.8 points.

SPB Exchange, following on from rival Moscow Exchange, late on Wednesday said it would exclude trading of Meta Platforms Inc. securities after the U.S. company was added to financial monitoring agency Rosfinmonitoring’s list of “terrorists and extremists”.

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Gold Price Today, 12 Oct 2022: Gold may fall to Rs 50650, silver slips 1%; wait for a deep correction

Gold Price Today, Gold Price Outlook, Gold Price Forecast: The gold rate and silver rate in India fell on Wednesday on the back of weak global cues. On Multi Commodity Exchange, gold December futures were trading Rs 204 or 0.4 percent down at Rs 50,892 per 10 grams, as against the previous close of Rs 51,096. Silver December futures were ruling Rs 786 or 1.34 percent down at Rs 57,749 per kg. Globally, yellow metal prices inched lower as traders looked forward to U.S. Federal Reserve minutes and key inflation data for clues on the pace of future interest rate hikes, according to Reuters. Spot gold fell 0.1% to $1,663.60 per ounce, hovering close to a one-week low touched on Tuesday. U.S. gold futures were down 0.8% at $1,673.30.

Jigar Trivedi, Senior Analyst – Currency & Commodity, Reliance Securities

The yellow metal declined in the morning session after the greenback appreciated. The mighty US dollar continued to fly high, rising for the sixth straight session and matching a 20-year high that it hit last month. Towards $1,660/1,650 an ounce, there is good support but overall the sentiment is bearish owing to an aggressive Fed. Eyes on US FOMC meeting minutes which will come later tonight & tomorrow US’s CPI for September. MCX Gold Dec may drop to Rs 50,650 per 10 grams.

Bhavik Patel, Commodity & Currency analyst, Tradebulls Securities

Yesterday gold prices came under pressure as after recovering to $1684, they dropped sharply to $1661 on account of a jump in the US dollar. The US Dollar jumped as GBP saw a sharp drop after Bank of England Governor Andrew Bailey warned fund managers they have until the end of this week to wind up positions as BOE is looking to end its bond-buying program. However today we saw some spike in GBP and Gold after rumors are circulating that BOE may extend the bond-buying program. Despite these rumors, gold remains under pressure as it is trading below $1700 and tomorrow’s US inflation data which is expected to show inflation will remain persistently high will give the Dollar an additional boost to rally. Today’s Fed minutes are also likely to show that policymakers remain willing to inflict serious economic pain on the U.S. and global economies as they try to bring down inflation. So gold is expected to remain under pressure at least till tomorrow and may see a relief rally if inflation does not come sharply higher. Any positional traders should wait for deep correction till 50150 for going long.

Navneet Damani, Sr. Vice President – Commodity & Currency Research, Motilal Oswal Financial Services

Gold prices inched lower for the fifth consecutive session, as traders looked forward to U.S. Federal Reserve minutes and key inflation data for clues on the pace of future interest rate hikes. The FOMC will issue minutes of its Sept. 20-21 meeting later in the day. The U.S. inflation reading will be released on Thursday and could cement expectations of another big rate hike at the November meeting. We already are at an 80% probability for a fourth 75bps rate hike scenario this year, according to the CME Fed watch tool. Fed official, President Loretta Mester said that even with a large number of rate rises this year, the central bank has yet to get surging inflation under control and will need to press forward with tightening monetary policy. These continuous comments from Fed officials since last week have weighed on the safe-haven appeal for gold and silver prices. The IMF also cut its global growth forecast and warned that colliding pressures from inflation, war-driven energy and food crises, and sharply higher interest rates were pushing the world to the brink of recession. Focus today will also be on UK GDP, US PPI, and CPI data on the domestic front. The broader trend on COMEX could be in the range of $1640-1685 and on the domestic front prices could hover in the range of Rs 50,400-51,200.

Deveya Gaglani, Research Analyst, Axis Securities

Comex spot Gold is back below the $1680 level, as the dollar regained its safe-haven appeal before Fed minutes, which is due later in the day. It is expected that Fed’s stance will remain hawkish in the upcoming policy meeting. They will continue to raise the interest rates by 75 basis points to check the high inflation. US inflation data, which will be released this week, may define the Gold trend for the month of October.

Eqwires Research Analyst

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