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Key Highlights

# MCX Gold closes at Rs 84,687 – Retreats after breaching Rs 86,000 amid global uncertainties.

# Dollar Index drops to 106.6 – Weak US retail sales raise concerns about consumer spending.

# Fed’s cautious stance on rate cuts – Powell signals no urgency despite inflation cooling.

# Trump orders new tariffs – Potential trade war fuels market volatility.

# Geopolitical tensions ease – Talks of a Russia-Ukraine ceasefire impact safe-haven demand.

What Happened?

MCX Gold experienced significant volatility on Friday, initially surging past Rs 86,000 before pulling back to close at Rs 84,687 per 10 grams. The retreat came as investors reassessed economic data from the US and geopolitical developments that influenced global risk sentiment. Meanwhile, international gold prices saw a similar trajectory, with spot gold hitting a record $2,942 per ounce before easing below $2,900.

The decline in gold prices coincided with a sharp drop in the US Dollar Index (DXY) to 106.6, driven by weaker-than-expected retail sales figures. January’s retail sales fell 0.9%, significantly missing the forecasted 0.1% decline, while control sales, a key GDP indicator, contracted by 0.8%. This raised concerns over slowing consumer spending, a key driver of the US economy.

Why Did Gold Prices Drop?

Despite the initial rally, gold prices retreated as a combination of factors altered market sentiment.

# Fed’s Stance on Rate Cuts: While CPI and PPI inflation data exceeded forecasts, the PPI components feeding into the PCE index showed signs of cooling. Fed Chair Jerome Powell reiterated before Congress that the central bank is in no rush to cut rates, dampening rate-cut expectations for 2024.

# Trade War Fears: US President Donald Trump instructed the Commerce Department to impose new tariffs on specific countries, raising concerns about a potential trade war. While the details remain unclear, the market remains wary of retaliatory measures by affected nations.

# Easing Geopolitical Risks: Trump also announced that the US would mediate negotiations for a Russia-Ukraine ceasefire. If tensions ease, the demand for safe-haven assets like gold could decline.

Who Was Impacted?

# Commodity Traders: Volatility in MCX Gold provided both opportunities and risks for intraday and positional traders.

# Investors Seeking Safe Havens: While gold remains supported by economic uncertainties, short-term corrections impacted those who entered at higher levels.

# Global Markets: The decline in gold prices affected risk assets as well, with European markets reacting positively to a possible Russia-Ukraine ceasefire.

Where Does Gold Stand Now?

MCX Gold remains in a consolidation phase, with immediate support around Rs 84,500 and resistance at Rs 85,800. Internationally, spot gold has key levels at $2,875 and $2,920 per ounce. A further slowdown in US economic data or geopolitical uncertainties could revive the rally.

When Can We Expect Further Moves?

# Upcoming US Data Releases: Inflation, employment, and GDP figures will dictate Fed policy expectations, influencing gold prices.

# Tariff Implementation Timeline: Markets will closely watch how long it takes for new tariffs to be imposed and whether trade negotiations prevent escalation.

# Russia-Ukraine Developments: Any concrete progress towards a ceasefire could further weigh on safe-haven demand for gold.

Conclusion

Gold’s rally past Rs 86,000 was short-lived as global economic concerns and policy uncertainty triggered profit booking. The retreat to Rs 84,687 signals caution among traders, as they await further cues from the Fed and trade policies. While a potential Russia-Ukraine ceasefire may reduce geopolitical risk, lingering economic uncertainties and possible trade wars could continue to support gold in the long run. Investors should keep an eye on upcoming economic data and geopolitical developments to navigate the next move in gold prices.

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