Gold rally likely to have more upside; check strategy, target here

Gold outlook: The yellow metal is likely to rise to $3800 (Rs 115,000) in the coming months, with support at $3600, according to Praveen Singh

Gold: Slightly down on healthy risk appetite

Gold performance:

• On September 11, spot gold prices traded between $3,614 and $,3649. The yellow metal at the time of writing this article was trading at $3,633, down by around 0.25 per cent for the day.
• The metal fell despite a weaker Dollar and disappointing data, as wider market rallies sapped the safe-haven demand for the metal to an extent.
• It is to be noted that the yellow metal hit its fresh all-time high of $3,674 on September 9 in the wake of a massive downward revision in US jobs as shown by the QCEW report.

Data roundup:

• Much-awaited US CPI report for August showed that US consumer price indicators rose mostly in line with the estimates. Although US inflation remains well above the Fed’s intended goal of 2 per cent, a Fed rate cut in September is certain as the US job market craters and inflation is still mostly rangebound.
• US inflation rose 2.9 per cent Y-o-Y in August versus the forecast of 2.9 per cent (prior 2.7 per cent), while headline inflation rose 0.4 per cent m-o-m (forecast 0.30 per cent, prior 0.2 per cent), the most since the start of the year. The core CPI increased 0.3 per cent from July, which was in line with the estimate and at the same level as recorded in July, while core CPI y-o-y rose 3.1 per cent in August, the same as estimated and recorded in July.
• Food and shelter prices contributed the most to August inflation. The food index rose 0.5 per cent over the month, while shelter prices picked up 0.4 per cent, the most since the start of the year.
• US weekly jobless claims spiked to 263K, a four-year high. The data underscores the weakness in the US market. Earlier on September 9, QCEW reported a massive downward revision of 911K jobs in the twelve months through March 2025.

Fed rate cut probability:

• Following the US release of the US data, traders have boosted their rate cut wagers as they now look for three rate cuts by the end of this year, as compared with two rate cuts.

Trade and tariffs:

• The  Mexican government is planning to impose 50 per cent tariffs on cars and other products made by China and several Asian exporters to align the country more closely with US protectionism as Mexican President Sheinbaum prepares for talks over North America's free-trade deal.
• US Commerce Secretary Lutnick says the Government of China is eating most of the tariff cost and China is paying an average tariff of 52 per cent. He expects a big deal with Taiwan soon.

Gold ETF:

• Total known global gold ETF holdings stood at 94.65 MOz as of September 10. Current level of holdings is at the highest level since November 2022 and is up 14.24 per cent YTD.

Dollar Index and yields:

• At the time of writing, the US Dollar Index is hovering around 97.53, down 0.30 per cent for the day. 
• Two-year US yields at 3.51 per cent is down 0.85 per cent for the day, while ten-year US yields at 4.01 per cent is down 0.89 per cent.
• Poland plans to raise its gold share in official reserves
• The management Board of the National Bank of Poland has decided to increase the share of gold in its official reserve assets from the current 22 per cent to 30 per cent, which would amount to an increase of around 187 tons of gold in its reserves

Upcoming data and events:

• Today's major US data on cards include University of Michigan Sentiment and inflation expectations (Sept. prel.).
• Investors will also follow Germany's CPI (August final) and the UK's monthly GDP data (July).

Gold outlook  

• The metal has reached our short-term target of $3,650. We expect it to rise further.
• Cracks in the US job market show that jobs are almost gone, and the unemployment rate is likely to rise. The US Federal Reserve will need to act with urgency to stem the decline of job market momentum. As inflation remains mostly in the recent ranges, hefty rate cuts are likely in the coming months.
• The yellow metal is likely to rise to $3800 (Rs 115,000) in the coming months.
• Support is at $3600 (MCX Gold October contract ₹108,800)/$3550 (₹107,300). Interim resistance is at $3700 (₹111,800).
• MCX levels at the USDINR rate of ₹88.27.

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(Disclaimer: Praveen Singh,  head currencies and commodities at Mirae Asset Sharekhan. Views expressed are his own.)