Gold price prediction today: Gold rates have been hitting life-time highs and analysts are of the view that hopes of Federal Reserve rate cuts are driving the rally. Praveen Singh, Senior Fundamental Research Analyst- Currencies and Commodities at Mirae Asset Sharekhan shares his views on gold price outlook and what levels investors should watch out for:Gold Performance:
- Spot Gold, driven by rate cut hopes and risks to the Fed’s independence, extended its winning streak to the fifth straight day on September 1. Earlier, the yellow metal closed with a weekly gain of 2.25% at $3,448 in the week ending August 29. At the time of writing this article, the shiny metal was changing hands at $3,475, up 0.80% for the day. The MCX October gold contract at Rs 104,724 was up 0.87%.
Data roundup:
- US data released on August 29 showed that US real personal spending rose by 0.3% in July, the most in four months. Core PCE Price Index came in at 2.9% y-o-y and matched the estimate, though it accelerated from the June reading of 2.8%, whereas headline PCE Price Index was up 2.6% y-o-y that matched the prior data and the estimate. The advance goods trade deficit surged to a record high of 103.60 billion in July. University of Michigan Sentiment (August) was revised lower from 58.60 to 58.20, three-month low, in its final reading as one-year and 5-10- year inflation expectations at 4.8% and 3.5% respectively fell short of their respective estimates. Although Fed’s preferred inflation gauge showed that inflation remains well above the Fed’s target of 2%, markets have taken the data in their stride and look for a 25-bps rate cut in the September FOMC meeting to be held on September 16-17.
- China’s PMIs were mixed, while Eurozone manufacturing PMI was revised higher from 50.50 to 50.70 in its final reading.
Fed Watch:
- The Fed Governor Waller said on August 29 that he supports a 25-bps rate cut in September and expects more cuts this year. He added that a jumbo rate cut possible should the economy weaken considerably.
Trade and tariff:Court ruling on Trump’s tariffs:
- On August 30, a federal appeals court, in its 7-4 decision, ruled that most of the President Trump’s tariffs exceeded his emergency powers as president as the US Court of Appeals court called reciprocal tariffs imposed universally on almost every country illegal. However, the court said that tariffs would remain in place until mid-October, as the case would be taken up by the US Supreme Court. As most of the Supreme Court judges who will investigate the case have been appointed by Republicans, markets are not ruling out the Court’s decision to come out in the President’s favor.
Gold ETF:
- As of August 29, total known global gold ETF holdings stood at 93.282 MOz, a fresh 2-year high and a fresh cycle high, as holdings jumped by around 1% in the week ending August 29. Gold ETF holdings are up around 10.50 MOz (around 330 tons) or 12.59% YTD. COMEX gold inventory at 38.926 MOz are down 13.65% from the record high level of 45.07 MOz.
Global Central Banks gold holding surpass their treasuries holding for the first time since 1996
- Prominent economist Mohammed El-Erian highlighted structural demand for gold in a post on social media platform X as he shared a post of the fund manager Tavi Costa which showed a chart indicating that for the first time since 1996, global central banks’ direct holdings of gold now exceed their treasury holdings as a percentage of foreign reserves for the first time since 1996. The development is slightly supportive for the metal.
CFTC:
- As per weekly CFTC data, money managers increased their bullish gold bets by 6,364 net-long positions to 148,122 in the week ending August 26. Long-only positions rose 3,813 lots to 181,374 lots. The short-only bets fell to the lowest level in three weeks.
China unites world leaders:
- On September 1, Chinese leader Xi Jinping, using the platform of the Shanghai Cooperation Organization (SCO) Summit in Tianjin, China, urged the leaders of nearly two dozen countries including Russia, Iran and India to integrate their economies and build an orderly multipolar world. He also proposed establishing SCO development bank to deepen economic ties.
US Dollar Index and yields:
- At the time of writing this article, the US Dollar Index was hovering around 97.68, down 0.10% for the day. US bond market was closed due to Labor Day Holiday. Both 2-year and 10-year yields were lower in the week ending August 29 as the yield curve underwent a bull steepening with 2-year yields falling more than the 10-year yields.
Upcoming data:
- This week is a crucial week for data as major US data on cards this week include ISM manufacturing (September 2), JOLTs job openings (September 3), ADP employment change (September 4), ISM services (September 4) and nonfarm payroll report (September 5).
- Investors will also focus on Eurozone CPI (September 2), Eurozone services PMI (September 3) and Eurozone GDP (September 5).
Gold Price Outlook:
- Gold is gaining mainly on rate cut hopes and risks to the Fed’s independence as the Trump Administration tries to dominate the Fed. Rate cut hopes have soared further on Governor Waller’s comments. In this context, the upcoming US nonfarm payroll will be crucial. Buying the dips is the preferred strategy. A test of all-time high at $3500 (Rs 105,500) looks highly likely. A disappointing ISM services/ nonfarm payroll data would be quite positive for the metal. Next major resistance comes in at $3,650 (Rs 110,000) Support is at $3450 (Rs 103,900)/$3400 (Rs 102,400).
- Silver is expected to test $43 resistance (MCX December contract Rs 131,500) in the coming months as ETF inflows remain quite healthy. Support is at $40 (Rs 122,500)/ $39.50 (Rs 121,000).
(Disclaimer: Recommendations and views on the stock market and other asset classes given by experts are their own. These opinions do not represent the views of The Times of India)
