No ceasefire will weigh on the metal. It can test the key support around $4550/$4400 in that case. (AI image)
Gold price prediction today: Amid the Middle East conflict, gold prices are likely to see limited upside in the short-term, says Praveen Singh, Head Currencies and Commodities, Mirae Asset ShareKhan. Performance:
- At the time of writing this article, the spot gold was changing hands at $4865, down by around 0.2% for the day.
- In the week ending April 2, spot gold closed with a weekly gain of 4.04% at $4678 on bargain hunting, short covering and easing US yields on expectations of de-escalation of the Iran war.
Oil and geopolitics:
- As the US President Trump’s April 7 deadline for intense attacks on Iran looms, US allies are pushing for a last-minute deal with Iran to secure a 45-day ceasefire. Axios reported that Pakistan, Egypt, and Turkey are pushing for a truce. However, Iran has rejected the ceasefire proposal saying that the proposal does not consist of any legal/international guarantees that attacks won’t be repeated. Crude oil, which has been correcting on a ceasefire possibility, is catching bids again, which is weighing on the metal.
- Meanwhile, fighting continues. Israel struck Iran’s largest petrochemical facilities, while UAE, Kuwait and Israel reported Iranian attacks.
- Iran has exempted Iraq from shipping restrictions allowing for as much as 3 mbpd of oil cargoes.
Data roundup:
- US ISM Services (March) came in at 54, which lagged the estimate of 54.90 and was lower than the prior reading of 56.1. The Employment Index unexpectedly contracted as prices paid were hotter-than-expected.
- US nonfarm payroll report for March released on April 2 showed that employers added 178K jobs in March as compared to the forecast of 65K jobs and prior figure of -133K. Unemployment rate edged lower from 4.4% to 4.3% (forecast and prior each 4.4%). Two-month payroll net revision stood at -7K Vs the prior -69K. However, average hourly earnings rose 0.2% m-o-m (forecast 0.3%, prior 0.4%) and 3.5% y-o-y (estimate 3.7%, prior 3.8%). Average weekly hours at 34.2 lagged the forecast of 34.3, too. Nonetheless, boosted by March payroll data, three-month average change is 68K Vs the prior data of 6k. Overall, it was a decent report, though risks due to the raging Iran war continue to linger.
- S&P Global US composite PMI came in at 50.3 Vs the forecast of 51.4 in the March final reading.
US Dollar Index and yields:
- Two-year US yields fell by nearly 3% to 3.79% last week, while ten-year yields were down by 2.7% to 4.30%. Consequently, the US Dollar Index eased by 0.1% to 100.02.
- At the time of writing, the US Dollar Index at 99.96 was down by 0.05%. Two-year yields were up by 7 bps, while ten-year yields rose by 2 bps.
ETF:
- Total known global
gold ETF holdings have picked up slightly. As of April 3, holdings, rising from 97.97 MOz — lowest since December 10, increased to 98.35 MOz–highest since March 23; holdings are still down by 0.50 MOz YTD though.
Central Banks continued to buy gold in February:
- Central Banks, following a purchase of 5 tons of gold in January, stepped up their buying to 19 tons in February as the National Bank of Poland bought 20 tons while Russia and Turkey sold 6 tons each.
- However, Turkey has sold/swapped nearly 118 tons of gold in March and April to defend Lira and carry out forex reserves management.
CFTC positioning:
- Money managers increased their bullish gold bets by 1,097 net-long positions to 93,872 in the week ending March 31. Long-only positions rose 796 lots to 120,53, while short-only positions fell 301 lots to 26,664 lots.
Fed rate cut chances:
- Implied overnight rates show almost zero rate cut this year.
Central bank watch:
- Kevin Warsh’s nomination hearing to become Fed Chair is set for April 16th.
- ECB’s Sleijpen said the Bank’s next discussion could be between hike/hold.
Upcoming data:
- Major US data on tap include ADP weekly change (April 7), durable goods orders (April 7), NY Fed 1-year inflation expectations (April 7), FOMC minutes of March 18 meeting (April 8), real personal spending (April 9), Q4 final GDP (April 9), March CPI (April 10) and University of Michigan sentiment and inflation expectations (April 10).
Gold Price Outlook:
- Somewhat encouraging US nonfarm payroll report for March has alleviated job market concerns to an extent, which is negative for the metal, though we note that the job gains came on favourable weather, so concerns will continue to linger unless trend is established.
- The scenario of no rate cut this year as compared with that of two rate cuts seen around seven weeks back is bearish for the metal.
- Central banks seem to be slowing down on their gold purchases this year.
- A convincing ceasefire with Iran can again revive the possibility of rate cuts this year. In that case, a sharp decline in oil prices may boost the metal to test the resistance around $4840, a decisive breach of which can help the metal to spike to $5000. However, considering the US’s March job report, upside is expected to be limited and could be short-lived if oil prices do not settle at much lower levels from the current levels.
- No ceasefire will weigh on the metal. It can test the key support around $4550/$4400 in that case. Prolonged war may force some more central banks to sell gold to meet liquidity requirements/for exchange rate stability/shore up defence expenses.
- Overall, gold remains somewhat vulnerable in short-term with a limited upside but is quite bullish in medium-to-long term on strong structural fundamental supports.
(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)
