Gold price today: Upside limited; check trading support, resistance levels

Gold rate in share market: Recovery in gold prices is being driven primarily by a sharp decline in the US yields and a retreat in the US Dollar Index

Gold: Up for the third day as the US yields and Dollar soften further

 

Gold Performance:

 

On January 16, spot gold traded with a positive bias as it extended its recovery to the third day on a minuscule miss in the US core CPI data (both M-o-M and Y-o-Y) released on January 15. The spot gold, at the time of writing this report, was changing hands at $2,724, up around 1 per cent on the day.

 

The MCX February contract was at Rs 79,257, up roughly 0.7 per cent.

 

Data roundup:

 

US retail advance sales came in at 0.4 per cent (forecast 0.6 per cent) month-on-month (M-o-M) for December, as ex-auto and gas sales were up 0.4 per cent (forecast 0.5 per cent). Retail sales control group, a more precise way to gauge consumer spending, was at 0.7 per cent, which was much better than the estimate of 0.4 per cent.

 

The prior retail sales data was revised higher from 0.7 per cent to 0.80 per cent. Import price Index M-o-M (December) was at 0.1 per cent, hotter than the estimate of -0.1 per cent, as even Y-o-Y reading at 1.8 per cent topped the forecast of 1.60 per cent. 

 

Philadelphia Business outlook (December), at 44.30, surged to the highest level since April 2021 and was way better than the expected data of -5, as the prior data was revised higher. Weekly jobless claims at 217K were higher than the forecast of 210K; however, continuing claims at 1859K were lower than the estimate of 1870K. NAHB housing market index came in at 47 Vs the forecast of 45.

 

US core CPI increased 0.2 per cent M-o-M (forecast 0.30 per cent) in December, while core CPI Y-o-Y, at 3.2 per cent, fell short of the forecast of 3.3 per cent and was slower than the November pace of 3.3 per cent.

 

The UK's monthly GDP data (November), released on Thursday, came in at 0.1 per cent, trailing the forecast of 0.2 per cent, as monthly GDP 3month/3month showed no growth and the prior data was revised lower from 0.1 per cent to 0 per cent.  Also Read: Silver price today: Sell with strict stop loss; resistance at Rs 93,400

 

US Dollar Index and yields:

 

The US Dollar Index, at 108.83, was around 0.20 per cent lower on the day at the timing of writing this report as it fell for the third day in a row on softer US yields. The ten-year US yields at 4.606 per cent were around 1 per cent down on the day as the yields fell to the lowest since January 6.

 

Upcoming data:

 

China data dump on January 17 include crucial GDP (Q4; released earlier today), industrial production (December), retail sales (December), property investment YTD Y-o-Y (December) and residential property sales YTD Y-o-Y (December). The major US data on the cards include housing starts and industrial production (both December). Traders will look forward to the Euro-zone's CPI Y-o-Y data (December final), too.

 

Major event ahead:

 

The incoming US President's inauguration is on January 20. Investors look forward to his inauguration speech to know about his economic and geopolitical policies and approaches that may significantly influence global financial markets including commodities prices.  

Gold ETF:

 

Total known global gold ETF holdings fell after rising for six straight days and were noted at 83.228MOz.

 

Gold Outlook:

 

Recovery in gold prices is being driven primarily by a sharp decline in the US yields and a retreat in the US Dollar Index. The ten-year US yields have dipped by nearly 20 bps in the last two sessions whereas the Dollar Index is down around 1 per cent.

 

Considering the US Fed's stance on inflation control and robust nonfarm payroll report (December) released last Friday only, gold and bond rallies based on a slight miss in the US CPI look overdone. In addition, Middle East geopolitical risks have also subsided at least for now. 

 

Tariff issues continue to pose a persistent threat. Although retail sales advance data lagged the estimate, retail sales control group data was encouraging.

 

Donald Trump's inauguration speech is likely to lead to a huge volatility in commodities prices.

 

Upside in gold prices, barring some unexpected bullish element in Trump's speech, is likely to be limited.

 

We suggest selling with a tight stoploss.

 

Support is at $2,700 (Rs 78,500)/$2,693 (Rs 78,350)/$2,663 (Rs 77,500). Resistance is at $2,731 (Rs 79,400)/$2,750 (Rs 80,000)/$2,775 (Rs 80,700)/$2,790 (Rs 81,200).

   

=========================

Disclaimer: This article is by Praveen Singh, associate VP, fundamental currencies and commodities at Mirae Asset Sharekhan. Views expressed are his own.