Gold may continue to trade with positive bias; Buying dips best strategy

Presently, gold is not affected by the traditional drivers. Traders are focusing rather on uncertainties over the US Presidential election outcome and possibility of resurgence of inflation in

Spot gold, despite strong data out of the US, defied gravity to hit a fresh record high of $2697. 

It was trading at $2693, up nearly 0.70 per cent on the day when the MCX closed while the MCX December gold contract was at Rs 77,175, up around 0.59 per cent.

The US yields and Dollar surged on upbeat data out of the US as the US 10-year yields were up over 2 per cent and the US Dollar Index approached 104.

Data and event roundup:

US retail sales advance (September) rose 0.40 per cent m-o-m (forecast 0.30 per cent), while retail sales ex auto and gas at 0.70 per cent beat the forecast of 0.30 per cent as the prior data was revised higher from 0.20 per cent to 0.30 per cent. Retail Sales control Group (September), which is a better gauge of consumer spending, surged 0.70 per cent Vs the forecast of 0.30 per cent rise. Initial jobless claims came in at 241K Vs the forecast of 259K as the impact of the hurricane Helene waned to an extent. Philadelphia Fed Business Outlook and NAHB housing Index data also topped the forecast, though industrial production at -0.30 per cent fell short of -0.20 per cent forecast.

As per Bloomberg, due to a series of stronger than expected data out of the US, the Citigroup's surprise Index is at the highest level since April. 

As expected, the ECB cut the rates by 25 bps, its third cut of the year, to support the private-sector growth amid a sharp decline in the CPI inflation. The September CPI inflation was revised lower from 1.80 per cent to 1.70 per cent. The Bank is expected to cut rates in December, too.

China's economy, meanwhile, expanded 4.6 per cent in the Q3 Y-o-Y as against 4.7 per cent, beating analysts' expectations of 4.5 per cent. On a quarterly basis, the economy expanded 0.9 per cent in Q3 as against 0.7 per cent growth in April-June.

Also, as per reports, China’s largest state-owned lenders have cut their deposit rates on Friday. Major banks including Industrial & Commercial Bank of China Ltd. and China Construction Bank Corp. trimmed the interest offered on one-year, two-year, three-year, and five-year time deposits by 25 basis points.

Upcoming data:

Today's major US data releases include housing starts (September).

ETF:

Total known global ETF holdings stood at 83.698Moz, the highest level since February 2024 as October could mark the fifth straight monthly gain. 

Geopolitical watch:

Israel said that it killed the Hamas leader Yahya Sinwar in an operation in Gaza. Oil dipped briefly on the news. Meanwhile, Israel-Hezbollah war continues in Lebanon as Israel has ramped up its efforts despite the US concerns.

Outlook:

Presently, gold is not getting affected by the traditional drivers like the yields and the Dollar Index. Traders are focusing rather on uncertainties over the US Presidential election outcome and possibility of resurgence of inflation in the US. The US yields are not that impactful in gold valuation due to huge fiscal deficit in the US. In addition, the upcoming BRICs Summit in Kazan, Russia, from October 22-24 is also gaining attention for clues to further developments on De-dollarization drive. India’s festive season demand begins in two weeks.

Gold may continue to trade with a positive bias in near term on aforesaid factors; thus, dip buying remains the best strategy.

Support is at $2670/$2658/$2640. Resistance is at $2700/$2750.

Disclaimer: Praveen Singh is associate vice president of fundamental currencies and commodities at Sharekhan by BNP Paribas. Views expressed are his own.