Gold slides after the greenback rebounds; MCX gold prices may drop to Rs 60,000

Gold slides after the greenback rebounds; MCX gold prices may drop to Rs 60,000

By Jigar Trivedi

MCX Gold in tandem with the COMEX prices fell to a one-week low on Friday, weighed down by a stronger dollar and an uptick in U.S. bond yields. The dollar rose to one-month peak and is heading for its biggest weekly gain since September, making bullion less attractive for buyers holding other currencies. Higher 10-year Treasury yields further dimmed zero-interest bullion’s appeal. Treasury Secretary Janet Yellen said there was still uncertainty about exactly when Treasury would run out of cash to pay U.S. government debts, which could come as early as June 1.

The US Dollar rebounds above 102.00 mark

The dollar index firmed up above 102.5 on Friday and was set for an over 1% weekly gain, the biggest since February, due to concerns over the US debt ceiling and regional banking stress, causing investors to seek safety in the currency. Additionally, there is speculation that the Federal Reserve may need to maintain higher interest rates for a longer period, following comments from Fed Governor Michelle Bowman that rates may need to be raised further if inflation persists. The latest economic data also showed that US consumer sentiment dropped unexpectedly to a six-month low in May.

Week Ahead – May 15th

In the US, the spotlight will be on speeches by several Fed officials and retail trade data, followed by industrial production and several housing indicators, including housing starts, building permits, and existing home sales. Elsewhere, Q2 GDP growth rates will be released for Japan, Thailand, the Netherlands, Poland, Israel, and Russia. Investors will also be closely following industrial production and retail sales for China, as well as inflation rates for Canada and Japan, and unemployment rates for the United Kingdom, France, and Australia. Additionally, the ZEW Indicator of Economic Sentiment for Germany and the GfK Consumer Confidence Indicator in the United Kingdom will be interesting to watch.

Outlook

MCX Gold June may drop in the coming week and Rs. 60,400 – 60,000 per 10 gram is the support range for gold price. On the COMEX front, $1,980 – $1,950 is the support. Only key thing that may work in the favour of gold is the US debt ceiling, then the yellow metal may rebound. Nonetheless, we expect gold rate to remain on a lower side and recommend sell on every bounce.

(Jigar Trivedi, Senior Research Analyst – Currencies & Commodities, Reliance Securities. Views expressed are author’s own. Please consult your financial advisor before investing.)