In the short run, gold prices will move primarily on the Fed nominee Warsh’s views on economy, dollar index, oil prices and yields. (AI image)
Gold price prediction today: Gold prices are likely to take cues from the US Federal Reserve stance on rate cuts in the near future, says Praveen Singh, Head Currencies and Commodities, Mirae Asset ShareKhan.Gold Performance:
- Spot gold was extremely choppy and volatile on April 20. Oil prices, after slumping on Friday, surged on Monday as Iran, alleging the US blockade of the Strait of Hormuz, closed the waterway once again. Gold slumped to $4737 in the Asian session before recovering on a slight retreat in oil prices.
- The metal at the time of writing this article was trading at $4800, down 0.60% for the day.
- Earlier, the yellow metal closed with a weekly gain of 1.7% at $4830 in the week ending April 17– its fourth straight weekly gain.
Geopolitics and oil:
- On April 17, oil prices slumped sending gold sharply higher when the news of the opening of the Strait of Hormuz was announced. The relief was short-lived as the US blockade continued, which forced Iran to shut the Strait once again.
- Oil prices shot up on Monday and were up by around 5% at the time of writing.
- The United States military seized an Iranian container ship Touska near the Gulf Monday; the military alleged that the ship refused to withdraw from its planned passage through the Strait of Hormuz.
- The US President Trump said Monday it is highly unlikely he would extend the two-week ceasefire with Iran if a deal is not reached before it ends. The ceasefire is ending on April 22. He said that the Strait would remain blocked until an agreement is finalized and fighting would resume if a deal were not reached.
Dollar index and yields:
- The US Dollar Index fell for the third straight week in the week ending April 20. The Index at 98.09 was down by 0.60% for the week.
- Similarly, 2-year yields at 3.79% were down by 9 bps for the week, third consecutive weekly gain, while ten-year yields settled 7 bps lower at 4.25% — down for the third straight week.
- At the time of writing, the US Dollar Index was hovering around 98.05, down by 0.05% for the day, while 2-year and 10-year yields were up by 1.5 bps each.
Global gold ETF and COMEX inventory:
- Total known global
gold ETF inflows continue to recover from the cycle low of 97.89 MOz reached on March 31. As of April 17, holdings stood at 99.19 MOz, up by 0.24 MOz YTD, but down by 1.73 MOz since the Iran war broke out on February 28
CFTC positioning:
- Money managers increased their bullish gold bets by 6,737 net-long positions to 98,850, in the week ending April 14—most bullish in four weeks.
- Short-only positions fell 481 lots to 29,788 lots.
Uganda Central Bank Starts Pilot Domestic Gold-Purchase Program
- Uganda Central Bank has started purchases for the three-year program aimed at building and diversifying the country’s foreign exchange reserves. The Bank will buy domestically mined gold from licensed miners and payment will be in local currency based on prevailing international prices.
Upcoming data and event:
- Today’s hearing on Kevin Warsh’s nomination before the Senate Banking Committee to chair the Fed will be crucial for the markets. Treasuries and risk assets have been rallying on Iran ceasefire prospects and possibility that incoming Fed Chair Warsh would push for easing monetary policy this year. His views on inflation and employment will be closely tracked by financial markets. If he sticks to his view that AI will increase productivity enabling rate cuts and looks through the war-driven energy shock, it will boost gold prices. However, a cautious stance on inflation, though, will weigh on commodities. Markets will also be interested in his views on rollback of the Fed’s $6.6 trillion crisis-era balance sheet. However, Republican Thom Tillis’s pledge to block Warsh’s nomination until the Justice Department finishes its investigation into Fed Chair Jerome Powell may complicate the matter.
- Major US data on tap in near term include weekly ADP, March retail sales (April 21) and April prel. readings of S&P Global US PMIs (April 23).
- Traders will keep a tab on PMIs of Eurozone and the UK to be released on April 23 along with the UK’s February job report (April 21) and March CPI (April 22), too.
Gold Price Outlook:
- In the short run, gold prices will move primarily on the Fed nominee Warsh’s views on economy, dollar index, oil prices and yields.
- Warsh sounding cautious on inflation will be bearish for commodities.
- At the same time, further re-escalation in the US-Iran tensions will also weigh on the metal. Overall, gold is expected to remain rangebound with a slight bearish tilt unless more clarity emerges on rate path. Support is at $4700. Resistance is at $4895. The next major levels are $4600 and $5000.
(Disclaimer: Recommendations and views on the stock market, other asset classes or personal finance management tips given by experts are their own. These opinions do not represent the views of The Times of India)
