Gold prices in consolidation phase, expected to move in an upward trend: Emkay Wealth Management
Emkay Wealth Management Ltd., the wealth management arm of Emkay Global Financial Services in its latest Navigator report cited that the gold prices in international markets is in a consolidation phase and such consolidation almost always prepares a launch pad for the yellow metal to move in an upward trend. Earlier in the year the demand for gold from China was often highlighted as a factor that was supporting higher gold prices. After the reported selling by China towards the end of April and beginning of May, this factor has become superfluous in the bigger picture. Over the last two weeks, stable dollar and firming US bond yields have placed a downward pressure on the gold prices. Technical support of gold is stated to be at US$ 3,297 and US$ 3,248.
On the forward directional price trend of gold, Emkay Wealth Management has cited that the current focus of the markets is on two factors, The first is the direction of US interest rates. With the Fed on hold as it is still unclear about the likely impact of the tariffs on the US retail prices, one of the major triggers for gold is absent. However, given the economic conditions and the relatively lower inflation numbers, the likelihood of the Fed going in for a rate cut or two before the end of this calendar year is very high. The second trigger is a byproduct of the first one, and it is an anticipated decline in the US Dollar against other currency majors. This can happen only with a sustained fall in the US Dollar yields and interest rates. The Dollar index is at 97.00 and this marks a fall of close to 10 % over the last six months, and a fall of about 10 % since the beginning of this calendar year. This has been already priced in the gold prices in the international markets, but what we need to see is a further fall in the Dollar caused by official rate cuts and a fall in market yields. There is a strong view that with the new budgeted spends to the tune of US$ 4.60 trillion, the situation could become murkier because the resultant borrowings may put upward pressure on the yields.
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