Rally in gold prices largely due to softness in the USD : Emkay Wealth Private Limited
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High probability of gold scaling levels of $2080/oz
Emkay Wealth Management, the wealth management and advisory arm of Emkay Global Financial Services have released a note on gold, price outlook, and the reason for the rally in the precious metal prices given the current setup. The note suggest, there is a high probability of gold prices testing the $2020 level and breaking through it. The levels 1930 and 1960 are strong support levels for gold currently.
Dollar Index biggest cue for gold prices
The Dollar Index is within narrow ranges at present is lending some support to gold. There is a feeling among some of the Fed officials that the stress in the banking system will only accelerate the arrival of the recessionary conditions earlier than expected. This will also keep gold fairly well supported. It may be stated that gold still retains its safe haven status and the recent events have had a positive impact due to this.
A higher probability is for gold to test the $2100 level again and break through the same. The only factor that may dilute this move would be a strong Dollar on the Dollar Index, and a more prolonged interest rate up-cycle. It is a bit too early to make any safe conclusions on this as geo-political conditions are not settled as yet, and market volatility is still rising.
Uncertainties in the US banking pushing up the gold prices
Gold is currently trading in the range of $1960-2060/oz. It made two attempts in the last one month to break through the $2060 level. What propelled gold recently has been the uncertainties around the US banking system, and also related developments in Europe, and the fears that it could spread to other territories as well. The initial factors that favored gold were the high probability of a moderation in the approach of the central banks to further tightening of the monetary policy.
Concerns of a slowdown supporting gold
It was also widely speculated that the potential for a slowdown could also add to the uncertainties. This helped gold to a certain extent in moving up. The support levels remain at 1960 and 1930, and the chances of these levels being broken remains very remote. In fact, it was attempted once and it bounced back from those levels.
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