Challenges for gold come from the Israel-Hamas conflict and the weak US dollar

Gold and silver have had a sharp surge this week, first on the basis of the Israel-Hamas confrontation and then on the back of a weaker USD and US Treasury. The risk premium began to accumulate in gold on Saturday after Hamas launched an attack on Israel, and the precious metal opened the week on a strong note. With nine days of losses in a row, gold was in oversold territory last week, signaling an imminent price rebound. The war prompted investors to close short positions and add to their new long holdings.

Gold had excellent support around $1800, and bulls were prepared to battle; therefore, we advised buying on falls beginning last week. We anticipated a reversal in the greenback’s value since, like gold, it was in an oversold condition after having been overbought.

Gold prices fell as US Treasury bonds and the greenback rallied in response to yesterday’s release of crucial US inflation data, which was stronger than expected. The likelihood that the Federal Reserve will raise interest rates at their December FOMC meeting was bolstered by yesterday’s data. At the last FOMC meeting of the year, the Fed is expected to raise its benchmark interest rate by 25 basis points (bps) and is only 3% likely to hike rates by 50 bps, according to the CME’s FedWatch tool. While the likelihood of a rate hike in November increased from 9.1% to 11.8% between yesterday and today,

Gold prices have recovered from last week’s lows, but their upward momentum seems to be fading as the Federal Reserve hints it will retain its tight monetary policy until inflation trends back to its 2% objective. Gold’s price on the COMEX is meeting immediate resistance around $1900. We do not see gold’s price easily rising beyond $1900.

When we receive evidence that bond rates have reached their maximum level, we will become positive on gold. For now, it will be difficult for gold to rise beyond $1900 since we think it is close to reaching the top. Despite investors’ hopes to the contrary, the Federal Reserve has completed its tightening cycle and will not be moving quickly to lower interest rates. That is correct for all central banks everywhere. Compared to this time last year, we are in an entirely new situation.

We advise going long in MCX between Rs 57600 and Rs 57500, with a target of Rs 58400 and Rs 58800 and a stop loss of Rs 57,000. If the RSI_14 momentum oscillator continues to rise and closes above 50, it will signal a positive trend reversal. Now that gold has closed above its 20-day moving average, the next upward goal is its 50-day moving average, which is about Rs 58,400. Due to the proximity of the 50-day and 200-day moving averages, that level should act as formidable resistance. Similar to how gold’s $1900 appears to be solid resistance, next week’s declines would be excellent buying opportunities.