Gold to move lower, sentiment negative; sell on rises until MCX gold price breaches 60,400

Gold to move lower, sentiment negative; sell on rises until MCX gold price breaches 60,400

By Bhavik Patel

The latest US inflation report revealed a contradictory outlook for the U.S where inflation came at lowest level in more than two years but the core CPI which skips food and energy prices as they are volatile came at 5.3% vs 5.5%. That might be the reason that even though the Fed paused during this meet, there are chances of two more rate hikes before the end of the year and no chance of rate cut unless inflation comes down significantly. If the Fed is still dealing with core inflation between 3% and 3.5% at the end of the year, markets won’t be expecting rate cuts any time soon either and this does not bode well for gold.

Gold technical outlook

Gold price breached its 100-day moving average in the COMEX but recovered as the US dollar drifted lower on account of a rally in Euro. Short term sentiment is still negative as gold had breached its 50-day moving average on May 17 after trading above it for the first time on March 13. Short term sentiment is expected to remain negative as gold in MCX continues to remain under the 13 and 20-day moving average.

Yesterday we saw some bounce back as the US dollar drifted lower but unless 60,400 is not breached on the upside in MCX, the trend still remains to sell on rise. 58,300-58,000 is the next support as 50% retracement comes around that level taken from highs of 61,845 and low of 54,771. 59,140 is the make or break zone as that is where 61.8% retracement is and since 26th May, gold has been taking support around that level. Yesterday it breached that level but managed to close above that level. So any closing of the gold rate below 59,140 would warrant more selling pressure till 58,300-58,000. Traders next week can look at opportunities around 59,900 to go short with a target of 58,900 and stoploss of 60,400. As mentioned only above 60,400, can we see a shift in trend from negative to positive.

(Bhavik Patelis a commodity and currency analyst at Tradebull Securities. Views expressed are the author’s own. Please consult yourfinancialadvisor before investing.)