Gold price outlook: How to trade yellow metal today? analyst decode

Gold price outlook: Strong ETF inflows, weaker US Dollar, weak US data and shaky Iran-Israel ceasefire are positive for the yellow metal in the near-term

Gold: caught between reduced safe haven demand and weakening US Dollar

Performance:

On June 26, spot gold traded between $3,310 and $3,350 as the metal faced selling pressure due to reduced safe haven demand on Iran-Israel ceasefire, while buying emerged on a weaker US Dollar. At the time of writing this article, the shiny metal was changing hands at $3,332 -- steady on the day. MCX August gold contract at ₹97,073 was down by ₹284.

 

Data roundup:

The US data dump on Thursday turned out to be mixed as the advance trade deficit (May) at $96.6 billion was wider than the expected figure of $86.1 billion due to a drop in exports as monthly imports were steady. Inventories data were mixed. The final reading of Q1 gross domestic product (GDP) came in at -0.5 per cent, which trailed the forecast of -0.2 per cent, as consumption was revised lower. 

 

Spending on services contributed merely 0.3 per cent to the GDP in Q1, the least since 2020 Q2, as all seven major categories of services spending were revised lower. Overall consumer spending increased at 0.5 per cent Vs the initial estimate of 1.2 per cent.  

Chicago Fed Nat activity Index (May) was weaker than expected as durable goods orde₹(May preliminary), driven by aircrafts, at 16.4 per cent beat the estimate of 8.5 per cent. Even the ex-transportation component at 0.5 per cent was stronger than the estimate of 0 per cent.  

The weekly job data report was mixed as initial jobless claims at 236,000 were lower than the forecast of 243,000, while continuing claims were more than expected. Pending home sales (May) came in at 1.8 per cent Vs the forecast of 0.1 per cent. 

Upcoming data:

Today's major US macroeconomic releases include real personal spending (May), PCE price Index (May) -- the Fed's preferred inflation gauge, University of Michigan sentiment (June final) and one-year and five-ten-year inflation expectations. 

September rate-cut bets:

A flurry of mixed US data released on Thursday has boosted bets of September Fed rate cuts as the consumption component of the GDP has been revised lower. Markets currently see more than two rate cuts this year. 

Geopolitics watch:

Iran's Supreme Leader Khamenei claimed victory in the war with Israel and said that the US's involvement in the war achieved nothing. The FT reported Thursday that European officials believe that Iran's stockpile of enriched Uranium remains largely intact. However, the US President Trump maintains that the enriched uranium was obliterated in the attack. 

Iran's Guardian Council suspended a law of cooperation with the IAEA as Iranian officials condemned the Agency for violating its own rules of neutrality. However, it is to be noted that Iran can only legally end cooperation with the Agency if it formally withdraws from the nuclear non-proliferation treaty. 

Powell's testimony:

The Fed Chair Powell testified before the House Financial Services Committee on Tuesday. He reiterated his stance of 'wait and watch' and insisted that the Fed should not rush to rush policy rate amid tariff uncertainty, though, in his testimony before the Senate Banking Committee on Wednesday, he acknowledged that rates are somewhat restrictive. The US President Trump called on Powell to lower rates as he continues to criticize Powell for not cutting rates. Powell's term as the Fed Chair ends in July 2026. 

COMEX gold inventory:

COMEX gold inventory has slid to 36.98MOz from the record high of 45.07 MOz observed in April, down nearly 20 per cent from the peak, as investors opt for physical deliveries. 

ETF:

As of June 25, total known global gold ETF holdings stood at 90.21MOz -- highest since August 2023. Holdings are up nearly 2 MOz in June and are up nearly 9 per cent year-to-date (Y-T-D). 

NATO sets new military spending target:

On June 25, NATO's 32 member countries agreed to set a new goal of spending 3.5 per cent of their respective GDPs on defense and a further 1.5 per cent in security-related matter by 2035; thus, taking the total defense spending up from 2 per cent to 5 per cent, though some members like Spain and Slovakia have raised doubts about meeting the target.   

US Dollar Index and yields:

The US Dollar Index slumped to 96.99, lowest since February 2022 as traders boosted Fed rate cut wagers. The US Dollar Index weakened on the speculation that the US President Trump may announce the name of the next Federal Reserve Chair early, which means that a Fed Chair of his choice may be more open to hasten the rate cuts or may influence the Fed’s stance to become dovish as compared to the present balanced stance of ‘wait and watch’. The Wall Street Journal reported that Trump may announce Jerome Powell’s replacement as soon as September. 

The Index, at the time of writing, was at 97.11, down 0.58 per cent on the day as it fell for the fifth straight day.

Ten-year US yields at 4.25 per cent were down around 0.88 per cent on the day as the yields fell for the sixth straight day. 

Tariff developments:

Chinese Premier Li Qiang urged global leaders not to let trade disputes become overly politicised. 

Outlook:

Strong ETF inflows, weaker US Dollar, weak US data and shaky Iran-Israel ceasefire are positive for the yellow metal in the near-term. However, markets are counting on the Iran-Israel ceasefire, which is creating a selling pressure on the metal.      

Declining USD-INR poses an additional downside risk to the MCX prices. The US Dollar Index may slide further on the European defense spending plans. In the very short-term, risk appetite is expected to remain healthy as US Indices approach all-time high levels.  

Spot gold is likely to remain rangebound in the present scenario. Rallies can be used for initiating sell positions unless Middle East risks surface up yet again. Support is at $3,305 (₹96,300)/$3,292 (₹95,900). Resistance is at $3,350 (₹97,600)/$3,375 (₹98,300). 

 

(Disclaimer: This article is by Praveen Singh, senior fundamental research analyst- currencies and commodities, Mirae Asset Sharekhan. Views expressed are his own.)