Gold: Buy the dips; key resistance at $2,550 in focus for yellow metal

Gold price today: On Thursday, spot gold came close to test its all-time high at $2,532 on lackluster US ADP employment change data (August); however, the rally was checked by slightly better-than-expected US ISM services (August) and S&P Global US Services and composite PMIs.

Spot gold was trading with a gain of 0.78 per cent at $2,515 at the time of the MCX closing. MCX October gold was at Rs 71,948 (LTP), up 0.67 per cent on the day.

Data roundup: ADP data disappointed but ISM Services encouraging

The US ADP employment change (August) came in at 99K versus the forecast 145K. Improving correlation of ADP data with the US nonfarm payroll data means that today's US NFP report may fall short of expectations. Unit Labor costs 2Q F came in at 0.40 per cent versus the forecast of 0.80 per cent, which is positive for the metal.

Initial jobless claims at 227K (Forecast 230K) and continuing claims at 1838K were better than expected. S&P Global US Services PMI (August Final) at 55.70 topped the forecast 55.10. Similarly, S&P Global US composite PMI (August final) at 54.60 was better than the estimated figure of 54. ISM Services (August) came in at 51.50 as against the forecast of 51.40 as new orders at 53 beat the forecast of 51.90. ISM services prices paid at 57.30 were higher than the estimate of 56. Decent ISM Services data has eased the US growth fears to some extent.

Upcoming data: US nonfarm payroll report (August) in focus

Today, the US nonfarm payroll report (August) will be released. Economists expect the US employers to add 165K jobs as compared to the lowly figure of 114K jobs in July as average hourly earnings are also likely to show improvements. Next week, US CPI inflation data will be released, which is likely to show the continuation of disinflation trend in CPI Y-o-Y data.

US yields and the Dollar Index: Lower

The ten-year US yields at 3.73 per cent were down around 1 per cent on the day as the two-year yields at 3.75 per cent were down around 0.40 per cent. The yield curve has almost become un-inverted, which reflects lingering concerns about the US economy as the Fed is all set to cut rates in its September meeting. The US Dollar Index at 101.11 was down nearly 0.24 per cent at the time of the MCX closing.

ETFs: Healthy inflows in last three months

Total known global gold ETF holdings stood at 83.01 MOz as of September 4, which is the highest level since mid-February. ETF flows have been positive for the third month in August.

Outlook: Buying the dips preferred as $2550 in focus

Traders will continue to buy the dips in expectation of a soft US monthly report as the key Job data like JOLTs openings and ADP have lagged the forecast. However, the risk to long positions may come from inflation momentum as both ISM services and S&P Global Services PMI reports showed input costs rising sharply due to higher supplier charges and rising salaries. It is to be noted that even manufacturers have signaled the pace of input cost inflation rising to a 16-month high on increasing wages and high shipping rates.

Support is at $2493 (Rs 71,300)/$2467(Rs 70,600)/$2450 (Rs 70,100). Resistance is at $2532 (Rs 72,400)/$2550 Rs (73,000). A decisive breach of the crucial resistance at $2550 will open the way for the $2,700 mark.