By Dr. Renisha Chainani, Head- Research, Augmont – Gold for all

The gold bull rally started in November from $1600 to $1950 in January. February was a profit-booking month, with prices correcting to $1810. March and April saw a pullback in prices with a record high of $2080 in the first week of May. That euphoria, however, was fading away, as we spent the next three weeks of May in a sharp downtrend, with prices falling to a two-month low of $1936 on May 31. What does this pattern signify? Two-step up and One-step down. This is exactly the pattern Gold is following for the last 6-7 months with the start of its bull run ladder. Prices rise the ladder with two steps up for a few weeks and then correct a bit with one step down and this continues..

Last week, very important economic data of Nonfarm payroll data was released, in which the US economy added 339,000 jobs in May, which was far better than the market expectation of 190K jobs addition. The report also showed that the Unemployment rate recovered to 3.7%. The strength of the jobs report, combined with the fact that a potential debt ceiling crisis had been averted, reduced the likelihood of a recession and increased selling pressure in gold and silver prices last week.

Although a better-than-expected jobs report reduced the likelihood of the Federal Reserve beginning a rate hike pause this month, the probability of a pause remains remarkably high. The CME’s FedWatch tool predicts a 74% chance of a rate pause in the June meeting, up from a 35% chance a week ago. With the Federal Reserve’s next monetary policy meeting less than two weeks away, reality is beginning to set in. Even if the Federal Reserve keeps interest rates unchanged in June, there is growing acceptance that another rate hike could occur this summer.

This new shift in interest rate expectations is making it difficult for gold to rise higher because it is supporting the US dollar, which is trading at a three-month high. To make matters worse, the summer is traditionally a weak season for the precious metal. Gold still has strong long-term support despite the difficult environment that may prevent it from reaching record highs shortly. The primary driver of price stability will continue to be central bank demand.

Disclaimer: This report contains the opinion of the author, which is not to be construed as investment advice. The author, Directors, and other employees of Augmont Enterprise Private Ltd. and its affiliates cannot be held responsible for the accuracy of the information presented herein or for the results of the positions taken based on the opinions expressed above. The above-mentioned opinions are based on information, which is believed to be accurate, and no assurance can be given for the accuracy of the information. The author, directors and other employees and any affiliates of Augmont Enterprise Private Ltd cannot be held responsible for any losses in trading. In no event should the content of this research report be construed as an express or implied promise, guarantee or implication by or from Augmont Enterprise Private Ltd. that the reader or client will profit or the losses can or will be limited in any manner whatsoever. Past results are no indications of future performance. Information provided in this report is intended solely for informative purposes and is obtained from sources believed to be reliable. The information contained in this report is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted. We do not offer any sort of portfolio advisory, portfolio management or investment advisory services. The reports are only for information purposes and are not to be construed as investment advice