By Dr. Renisha Chainani, Head- Research, Augmont – Gold for all
Gold began last week under severe bearish pressure as risk flows dominated financial market activity following the announcement that US President-elect Donald Trump has nominated fund manager Scott Bessent as US Treasury Secretary. Following reports of Israel and Hezbollah negotiating a ceasefire agreement, Gold extended its slump, losing roughly 3% per day.
Then gold prices got support from economic data. October’s consumer spending released progress in reducing inflation has stagnated in recent months, raising questions about the Fed’s ability to tighten monetary policy further. Compounding these difficulties is the possibility of higher tariffs under the incoming Trump administration, which could limit the Fed’s ability to implement any rate reduction next year. Although a December rate cut is still projected, the Fed may reconsider its strategy as we move into 2025.
This week’s employment-related macroeconomic data releases on the US economic calendar may influence market pricing of the Fed’s rate decision at the year’s final policy meeting. Following the 12,000 increase in NFP in October due to hurricanes and labour strikes, investors expect a significant comeback, with a print of 183,000 in November. A figure above 200,000 might contribute to predictions of a Fed policy hold in December, raising US T-bond yields and weakening gold prices. On the other hand, poor data or below 150,000 might keep chances for another 25 basis point rate drop alive, paving the way for a step higher in gold ahead of the weekend.
Gold may become more attractive as a safe-haven asset in the medium term due to President-elect Donald Trump’s proposed tariffs on imports from China, Canada, and Mexico as well as growing geopolitical risks in Eastern Europe. Global tensions and trade policy uncertainties may continue to be major drivers of gold demand.
As Gold prices have given around 30% returns this year, we are likely to witness a bout of profit-booking by hedge funds and ETFs in December, which might put pressure on the prices. But amid geopolitical worries, prices will stay supported above $2500 (~Rs 73000).
Gold Daily Chart
As discussed in the last Weekly Blog “Gold to feel exhaustion after posting strongest gains the past week”, gold prices continued their southward journey and indeed achieved the target of Rs 75500 last week.
We are likely to see consolidation and rangebound momentum in gold prices this week. Important support levels are around $2600 (~Rs 75500) and resistance is $2720 (~Rs 78500). Gold is in an uptrend until the prices are trading above $2550 (~ Rs 74000). We are likely to see dip-buying until these levels are sustained.
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