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May 22, 2024
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Gold near five-week low as expectations for rate-cut ease: Should you invest?

Gold prices hovered near five-week lows on Thursday, January 18, as hawkish remarks from Federal Reserve officials and robust data dampened investors’ expectations for deeper and early interest rate cuts in the United States this year. Spot gold, after falling to $2,001.72, its lowest point since December 13, showed a marginal recovery, edging 0.1% higher to $2,008.59 per ounce, according to news agency Reuters.

Back home, gold futures, maturing on February 5, 2024, stood at ₹61,589 per 10 grams.
The strengthening of the US dollar played a pivotal role in the recent downturn of gold prices, as highlighted by Brian Lan, a representative from the Singapore-based dealer Gold Silver Central. According to a Reuters report, Lan said that the dollar’s gain over the past few days has imposed pressure on gold prices.

The dollar’s ascent was further fueled by data revealing a higher-than-expected increase in US retail sales in December, maintaining the country’s economic stability as it entered the new year.

According to Chintan Mehta, CEO, Abans Holdings, a heightened sense of instability in the Red Sea region, marked by an escalation in attacks and counterattacks on the geopolitical front, has supported the demand for gold.

Additionally, investors are closely monitoring statements from Federal Reserve members, particularly Atlanta Federal Reserve President Raphael Bostic, who is expected to speak later in the day.

The outlook

“The yellow metal is anticipated to find support at $2000-1988 per ounce, with resistance at $2024-2038 per ounce. In terms of rupee, gold is likely to find support at ₹61,250-61,080 per 10 grams, with resistance at ₹61,690,-₹61,840 per 10 grams.

“We believe that gold will consolidate at its current prices. Currently, we are observing a rally up to ₹63,500. On the downside, gold may experience a correction down to ₹61,000 levels,” he said.

Should one invest?

Mehta emphasises the importance of monitoring commodity markets during these uncertain times. He added that gold remains an attractive investment opportunity despite the recent dip.

Lan further added that it’s time to make a profit by investing in the yellow metal.

“The year has just started, and probably a lot of investors think that prices are not going any higher, so it’s time to secure gains. It’s a usual market cycle from what we see,” he was quoted as saying by Reuters.

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