May 8, 2023
Gold prices slipped from their highs on Monday, hovering around $2,314 per ounce and Rs 71,146 per 10 grams on the MCX. This decline came despite lower US yields, with a rebound in the US Dollar weighing on the precious metal.
The US bond market extended its Friday rally, with ten-year yields dipping nearly 1% to 4.44%. However, the US Dollar Index edged higher on hawkish Fedspeak, putting pressure on gold prices.
Geopolitical tensions in the Middle East also impacted gold prices. Israeli forces took control of the Rafah border crossing in Gaza, raising concerns about a potential assault on the city. Ceasefire talks between Hamas and Israel continue, but a breakthrough remains elusive.
Global gold ETF holdings fell for the third consecutive day to 80.656 Moz on May 7. Some volatility is expected on May 9, with the Bank of England's monetary policy decision due.
Despite the recent decline, gold prices are expected to trade within a range in the near term. Geopolitical developments and yields will likely be the major drivers in the short term. China's central bank extending its gold buying spree is positive, though the reduced quantum is somewhat negative for the metal.
In the coming weeks, gold may test the $2,350-$2,360 resistance zone (Rs 72,200-Rs 72,500 on the MCX). Support is at $2,300/$2,265 (Rs 70,700/Rs 69600 on the MCX).
Praveen Singh is an Associate VP of Fundamental Currencies and Commodities at Sharekhan by BNP Paribas. Views are his own.