Gold trading strategy: avoid large short positions; check the most important levels here
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Gold – Rise after disappointing US jobs data, with geopolitical focus
Performance
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Spot gold was trading at $2,624 at the time of the MCX close, up about 0.55 percent on the day. The MCX December Gold contract at Rs 75,152 (LTP) rose almost 0.30 percent.
Gold rose after six straight days of losses as it gained on disappointing US weekly jobless benefits data, although higher-than-expected US CPI inflation data limited the uptrend and led to a volatile session.
Data overview
The long-awaited US CPI inflation figures rose more than expected in September in all respects. Lodging prices, the largest category within the services sector, rose 0.2 percent from August’s 0.5 percent advance, while owner’s equivalent rent rose 0.3 percent, a slowdown from the previous month. However, excluding housing and energy, service prices rose by 0.40 percent, the highest level since April. The CPI mother stood at 0.2 percent (expectation 0.1 percent), the annualized CPI was recorded at 2.4 percent (expectation 2.30 percent), the core CPI rose by 3.3 percent, the fastest pace since June, surpassing the estimate of 3.2 percent per year. cent, while the core CPI mom amounted to 0.30 percent (expectation 0.20 percent). Initial claims rose by 33,000 to 258,000 in the week ending October 5, the highest since August 2023. Even continuing claims were higher than forecast, rising to 1.86 million (expected 1.83 million). The weekly jobs numbers were disappointing; However, to some extent the measurements may have been affected by disturbances from Hurricanes Helene and Milton.
US Dollar Index and Returns
The US Dollar Index extended its rally to a ninth straight day, rising 0.07 percent to 103. The ten-year US yield at 4.10 percent rose 3 basis points, while the two-year yield fell 0.6 percent to 3. 99 percent. The two-year interest rate is vulnerable and will probably rise above 4 percent again.
Geopolitical watch
Israel’s security cabinet was scheduled to meet on Thursday evening to discuss Israel’s long-awaited response to an Iranian missile attack. Meanwhile, Israel continues its operations in Lebanon and has reportedly hit central Beirut.
ETF
The total number of known global gold ETF positions at 83.521 Moz was slightly lower than last week’s level of 83.540 MOz.
Upcoming details
Today’s US data includes sentiments based on the PPI (September), University of Michigan (tentatively October) and University of Michigan inflation expectations.
Outlook
Spot gold continues to draw support from the conflict in the Middle East; However, as Israel’s response to the Iranian attack is still awaited, the demand for safe havens is not strong enough to lead to meaningful progress. At the same time, the rising US dollar and falling bond prices continue to pose challenges for bulls. US inflation data and September’s monthly jobs report will put the Fed in a tough spot over its future rate cutting decisions, as the Fed should proceed cautiously in making decisions on its monetary policy. If the ongoing war flares up, gold will rise sharply in value as the impact of the numbers will be limited, at least in the short term.
Going into the weekend, it is advisable to buy the dips and avoid large short positions.
The support is at $2600 (Rs 74,500)/$2575 (Rs 73,800). Resistance is at $2655 (Rs 76,000)/$2675 (Rs 76,500).
(Disclaimer: Praveen Singh is associate vice president of fundamental currencies and commodities at Sharekhan by BNP Paribas. The opinions expressed are his own.)
First publication: October 11, 2024 | 8:22 am IST