Gold is expected to range trade with a bearish bias as markets are still somewhat optimistic about a deal as the ceasefire will hold for one more week. (AI image)
Gold price prediction today: Gold prices may trade range-bound with a bearish bias as a breakthrough in US-Iran peace talks remains elusive, says Praveen Singh, Head Currencies and Commodities, Mirae Asset ShareKhan.Gold Performance:
- On April 13, spot gold tumbled to $4633 in the Asian trading hours as oil prices spiked on supply concerns on the US President Trump’s threat that the US would blockade the Strait of Hormuz after US and Iran failed to reach an agreement in their weekend talks in Islamabad, Pakistan.
- At the time of writing this article, spot gold was hovering around $4710, down by nearly 0.90% for the day.
- Earlier, the yellow metal closed with a loss of 0.37% at $4748 on April 10 despite a weaker Dollar and University of Michigan Sentiment tumbling to record lows in its preliminary April reading. Despite Friday’s loss, spot gold posted a weekly gain of 1.5%, its third straight weekly gain, as traders were largely hopeful ahead of the weekend US-Iran talks scheduled in Pakistan.
Geopolitics and oil:
- US-Iran talks collapsed as the two sides remained far apart on crucial issues like the control of the Strait of Hormuz, reparations, enrichment of Uranium, Lebanon strikes, etc.
- Following the failure of the talks, the US President Trump threatened a blockade of the Strait of Hormuz, which Iran called illegal. The Blockade has gone into effect as of the time of writing. It is to be noted that Iran has been shipping nearly 2 mbpd of crude oil even during the war. Iraq has been seeking permission to ship oil through the Strait. Iraq’s oil flow would also be impacted.
- Crude oil surged nearly 10% on Monday on rising supply risks as the US’s blockade could choke remaining flows through the Strait.
- Iran has threatened ports in the Persian Gulf.
- The US-Iran-Israel ceasefire has been holding but Israel-Hezbollah strikes continue.
- The US has more than 15 warships in place to support the blockade of the Strait of Hormuz to support the Blockade.
Data roundup:
- US Existing home sales data released on Monday were mixed.
- The US data released Friday showed that US CPI, the headline CPI surged by 3.3% y-o-y in March from 2.4% in February, the most in nearly two years as gasoline prices skyrocketed in the Iran war. CPI inflation rose by 0.90% m-o-m, the most in nearly four years. University of Michigan consumer sentiment slumped from 53.30 in March to 47.60 (forecast 51.10) in April, a record low, in its preliminary reading on inflation worry as one-year inflation expectation surged to 4.8%– highest since August.
- China’s credit expansion slowed more than expected in March from a year earlier due to continued weakness in household and business demand weighs on financing activities. Aggregate financing increased 5.2 trillion yuan ($765 billion) in March, compared with a median forecast of about 5.6 trillion yuan.
Gold ETF:
- As of April 10, total known global
gold ETF holdings stood at 98.69 MOz, up by 0.8% from the cycle low of 97.89 reached on March 31 but are down by 2.25% since the Iran war broke out on February 28.
Dollar Index and yields:
- The US Dollar Index at 98.75 was up by 0.10% at the time of writing. Two-year and ten-year US yields at 3.80% and 4.32% were up by 1 bps each.
Expected rate path of key Central banks:
- Overnight rates imply 0.15 rate cut by the Fed by the year-end, while the ECB and the Bank of England are expected to hike rates 2.75 and 2 times respectively.
CFTC data:
- Money managers decreased their bullish gold bets by 1,759 net-long positions to 92,113 lots in the week ending April 7. The net-long position was the least bullish in more than two years. Long-only positions rose 1,846 lots to 122,382 lots. The long-only total was the highest in three weeks. Short-only positions rose 3,605 lots to 30,269 — the highest in more than five months.
Upcoming data and events:
- Major US data on tap in near term include March PPI (April 14), import price index (April 15), TIC flows and industrial production (April 16).
- Traders will monitor China’s trade balance (April 14), 1Q GDP, retail sales, industrial production and property data (April 16).
- Eurozone’s March CPI will be released on April 16.
- The Fed Governor Waller will speak on economic outlook on April 17 at Auburn University.
Gold Price Outlook:
- Collapse of US-Iran talks, and the US’s blockade of the Strait of Hormuz have reduced the possibility of a diplomatic solution anytime soon, though diplomatic talk always remains a possibility.
- Crude oil prices are expected to trade with a positive bias on increasing supply concerns, which will keep the US Dollar Index and yields firm as central banks are expected to renew their vigilance of inflationary pressure.
- Risk assets are bid on earnings expectations, which is holding back the US Dollar, but this situation is unlikely to last unless the US and Iran thrash out a convincing deal.
- Gold is expected to range trade with a bearish bias as markets are still somewhat optimistic about a deal as the ceasefire will hold for one more week. The metal may test support at $4600/$4550. Interim support is seen at $4684. Resistance is at $4800/$4900.
(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)
