By Bhavik Patel
Gold is in a precarious position as participants are waiting for its next direction and trigger which will come after 14th March. US Fed Chairman Powell was super hawkish during the semi annual congressional testimony which took the US dollar above 105. He stressed that latest economic data are stronger than expected and inflation continues to remain high. Market had started to anticipate a 50 bps rate hike in the next meeting but some respite came after Powell stressed the fact that the Federal Reserve will not make any final decision about the size of a potential interest rate hike until data from Friday’s jobs report and next Tuesday’s CPI report have been released. Gold is likely to pivot between $1785-$1850 until these two data are released.
In MCX, gold is near to its 50% retracement taken from highs of 58847 and low of 50000. We have seen strong resilience in gold and its ability to hold solid support above $1,800 an ounce could signal that investors doubt the Federal Reserve’s ability to bring down inflation. $1785 still proves to be strong support and if Fed hikes rate by 50bps then we may see gold testing those levels. However, the Fed’s decision will come after today’s Non-Farm payroll data and Tuesday’s CPI so we don’t see any clear direction in gold for the time being.
Technically, gold is near its oversold zone but not there yet so there is room on the downside and we would recommend investors to wait and watch for today’s employment data and US inflation data next week before taking any fresh position as further direction for gold will only come after this set of data. Before that, there would be purely speculation on parts of participation so volatility will also be there. Better be safe on trade and avoid taking any position for the time being.
(Bhavik Patel, Currency and Commodity Analyst, Tradebull Securities. Views expressed are author’s own. Please consult your financial advisor before investing.)