A Detailed Analysis
Gold prices experienced a slight decline today, with spot gold trading at $2,468 at the time of the MCX Closing. This slight loss can be attributed to weakness in outside markets, as most commodities fell despite softer-than-expected US PPI data for July. The yellow metal traded within a relatively narrow range of around 1%.
The US Producer Price Index (PPI) rose at a slower pace than expected in July, with services costs declining for the first time this year. The PPI for final demand came in at 0.10% month-on-month, compared to the forecast of 0.20% increase. The PPI excluding food and energy remained unchanged at 0.0% in July, marking the slowest pace since March.
Services costs fell by 0.20%, while prices of goods increased by 0.60%, the highest since February. The PPI excluding food and energy rose 2.40% year-on-year, compared to 3% in June. PPI final demand rose 2.20% year-on-year, while PPI excluding food, energy, and trade came in hotter than expected at 0.30% month-on-month and 3.30% year-on-year.
Total known global gold ETF holdings fell to 82.20 million ounces on August 12th from 82.293 million ounces on August 9th. Despite this slight decline, global gold ETFs experienced their strongest month of inflows since April 2022, with North American funds actively investing in the metal.
Traders are expected to buy dips ahead of the US CPI data on expectations of subdued readings. Declining US yields and a weakening US Dollar Index are positive factors for gold. Geopolitical concerns also support the yellow metal as traders brace for a possible retaliation by Iran following the killings of Hamas and Hezbollah commanders.
Support for gold is seen at $2450 (MCX October contract Rs 70,200), $2432 (Rs 69,700), and $2418 (Rs 69,200). Resistance is located at $2478 (Rs 71,000), $2484 (Rs 71,200), and $2500 (Rs 71,600).
The views expressed in this analysis are those of Praveen Singh, Associate Vice President of Fundamental Currencies and Commodities at Sharekhan by BNP Paribas, and do not necessarily reflect the views of Sharekhan or BNP Paribas.