Gold surged to a fresh record high on Thursday, breaking through previous resistance levels and reaffirming its bullish momentum. Spot gold, which had been consolidating within the $2,470-$2,530 range for nearly three weeks, rallied to hit a new all-time high of $2,555. The surge came on the back of a slight uptick in U.S. jobless claims, a revision of the Producer Price Index (PPI) data, and the European Central Bank’s (ECB) decision to cut rates by 25 basis points (bps).
At the time of writing, spot gold was trading at $2,551, up 1.59%, while the MCX October gold contract had risen by 1.21% to ₹72,794.
Key Data Highlights
- U.S. Jobless Claims: Initial jobless claims for the U.S. came in at 230,000, slightly higher than the forecast of 226,000. The previous data was also revised upward by 1,000.
- Producer Price Index (PPI): The PPI for August rose by 0.2% month-on-month, slightly above expectations of 0.1%. Core PPI increased by 0.3%, again surpassing the forecast of 0.2%. These figures, coupled with downward revisions to July’s PPI data, bolstered market sentiment and increased expectations of a rate cut by the U.S. Federal Reserve.
- ECB Rate Cut: As anticipated, the ECB reduced its deposit facility rate by 25 bps to 3.50%, citing concerns over inflation and growth risks. This was the second rate cut this year, and the ECB emphasized that future monetary policy decisions will be data-dependent.
Impact on U.S. Dollar and Yields
U.S. Treasury yields initially dipped following the data but recovered swiftly. The 10-year U.S. Treasury yield rose to 3.69%, up over 1% on the day, while the 2-year yield also climbed to 3.69%, marking an increase of 1.35%. The U.S. Dollar Index, which measures the dollar’s strength against a basket of currencies, was down 0.10% at 101.5.
Gold ETF Holdings
Global gold exchange-traded fund (ETF) holdings stood at 83.058 million ounces as of September 11, marking the highest level since mid-February, reflecting renewed investor interest in the yellow metal.
Market Outlook
The market’s primary focus is on the upcoming U.S. Federal Open Market Committee (FOMC) meeting on September 18. With the U.S. Federal Reserve expected to start cutting rates, analysts predict that gold will continue its upward momentum. While the latest inflation data (CPI and PPI) doesn’t indicate an immediate need for drastic rate cuts, market participants still expect the Fed to reduce rates by over 100 bps this year, shifting its focus from inflation to employment.
Gold is likely to extend its gains after breaching the crucial resistance level of $2,550, but traders are advised to exercise caution ahead of the Fed’s upcoming monetary policy decision.
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Support and Resistance Levels
- Support: The first support level for gold is at $2,525 (₹73,000), followed by a secondary support at $2,500 (₹72,300).
- Resistance: On the upside, the next significant resistance is at $2,600 (₹75,200).
Trading Strategy
- Support Level: If gold prices dip towards ₹73,000, it could present a buying opportunity for traders anticipating further gains. This level has acted as a solid support base in recent sessions.
- Resistance Level: At ₹75,200, gold faces strong resistance, and traders should consider booking profits if prices approach this level, especially ahead of any key economic announcements or policy changes from the Fed.
- Risk Management: Given the upcoming FOMC meeting, traders should remain cautious, as rate cut decisions could cause volatility in gold prices. A cautious approach is recommended, particularly when prices hover around the ₹75,000 mark.
Gold has breached significant resistance levels and continues to exhibit a bullish trend, supported by global economic conditions and central bank policies. As the market anticipates potential rate cuts from the U.S. Fed, gold prices could see further upward movement, with ₹75,200 acting as the next major resistance level. However, traders should remain vigilant ahead of the Fed’s monetary policy decision, as it could trigger short-term volatility. For now, ₹73,000 serves as a crucial support level, while ₹75,200 will be a key resistance point in the coming days.
