Gold prices will be kept in check by the strength of the US Dollar index By Mr. Mahesh Kumar, Abans Group
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Below is Outlook on Gold By Mr. Mahesh Kumar, EVP & Head Capital & Commodities Market (Abans Group)
Gold prices will be kept in check by the strength of the US Dollar index.
On Friday, gold prices fell drastically after hitting a recent high of 1879.50 on November 16th, and are presently trading at 1842.55, just below last week's low of 1844.42, owing to the strengthening of the dollar index. Due to the deepening of the global epidemic, the US dollar index saw significant increases last week and received some safe-haven support. In addition, a drop in German bond yields has undermined the euro's interest rate differentials, strengthening the dollar. Due to hawkish comments by Fed Governor Waller, the dollar also extended its gains on Friday.
The 10-year German bund yield fell to a 2-month low of -0.343 percent on Friday, and is now trading at -0.340 percent, putting pressure on the euro and strengthening dollar index further.
Comments from Fed Governor Waller were negative for gold when he said, "the rapid improvement in the labor market and the deteriorating inflation data have pushed me towards favoring a faster pace of tapering and a more rapid removal of accommodation in 2022."
Gold prices, on the other hand, are likely to benefit from dovish comments from ECB President Lagarde . Even in the face of "unwelcome and painful" inflation, ECB President Lagarde said she is "confident" that inflation pressures will subside over time and that the ECB should not tighten monetary policy too quickly.
On economic data front, Japan’s Oct national CPI rose +0.1% y/y, weaker than expectations of +0.2% y/y .
The net long of gold futures grew by 9599 contracts to 259780 contracts, according to the CFTC Commitments of Traders report for the week ended November 16. Shorts gained 9819 contracts, while speculative longs gained 19418 contracts.
Gold prices, which fell as a result of the strengthening of the US dollar index, are expected to find immediate support at the 20-day EMA at $1832 and the 50-day EMA at $1810, while stiff resistance is expected around $1858 and $1872.
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