Gold may remain choppy, volatile in short-term: Praveen Singh, Sharekhan

Gold: Recovers as Trump calls for rate cuts

 

Performance

 

Spot gold traded between $2735 and $2759 on January 24. Gold fell to $2735 in the US session as the US Dollar and yields recovered. However, the metal recovered on Trump’s speech at Davos Forum calling for lower rates to support the economy.

 

The yellow metal was trading at $2758, up nearly $2, at the time of writing this report.

 

The MCX February contract at Rs 79,644 was up 0.44 per cent.

 

Trump’ speech

 

President Donald Trump, as he addressed world leaders at Davos Forum on January 23, said that he would ask Saudi Arabia and other OPEC nations to bring down the cost of oil as he reiterated his threat to use tariffs to support manufacturing in the US. He also called for an immediate cut in interest rates. He blasted wasteful deficit spending of the previous US government and energy restrictions.

 

 

The US Dollar Index declined on his comments, which led to a recovery in gold prices from the day’s low.

 

Data roundup 

US weekly job data were weaker-than-expected initial jobless claims rose to 223K (forecast 220K) from 220K whereas the continuing claims at 1899K (prior 1866K) were way above the forecast of 1866K. The continuing claims rose to the fresh cycle.  ALSO READ: Silver trading strategy: Check Support, Resistance, other key levels here

 

Upcoming data

 

Today's major data attractions will be PMIs out of Europe and the US. Apart from these data, traders will also monitor Japan's national CPI inflation (December) along with University of Michigan sentiment (January preliminary) and both 1-year and 5-10year inflation expectations.

 

US yields and the Dollar Index 

The ten-year US yields recovered to rise more than 1 per cent to 4.645 per cent despite weak weekly job data. The 30-year US yields at 4.88 per cent were up 1.37 per cent bps at the time of writing this report. The US Dollar Index at 107.97 was down 0.20 per cent.

 

ETF

 

Total known global ETF holdings fell from 83.55 MOz to 83.302 MOz. As the ETF holdings stood at 82.852MOz at the end of the last year, gold ETFs have witnessed a net outflow so far this year.

 

World Gold Council’s gold outlook 2025:

 

The World Gold Council sees healthy gold buying by central banks to support gold prices in 2025 as the central bank gold buying remains an important driver of the metal prices. The official sector demand for gold above 500 tons, the approximate long-term trend, will have a net positive impact on gold prices, though a decline below this level may pressurize gold prices.

 

Outlook

 

Gold is looking somewhat overstretched at the current level as the US economy continues to do well amid sticky inflation and strong job market. The current economic scenario has prompted the US Fed to adopt a hawkish stance. However, markets are hopeful that slightly softer-than-expected US CPI reading (December) may be start of a trend of lower inflation that may pave the way for the Fed to cut rates more than the previous expectations of just two cuts this year. Fund flows at the beginning of the year are also supporting gold prices. Geopolitical risks have subsided on ceasefire agreements in the Middle East.

 

Gold may remain choppy and volatile in very short-term as markets are leaning towards more rate cuts.

 

The metal is expected to trade in a wide range of $2700-$2800 (Rs 80,800) in near-term. Nearest support is at $2730 (Rs 78,800), followed by $2700 (Rs 78,000). Interim resistance is at $2775 (Rs 80,100)/$2790 (Rs 80,500) (all-time high). It is advisable to sell into rallies with tight stop-losses unless and until major US data disappoint.

 

(Disclaimer: Praveen Singh is an associate VP of fundamental currencies and commodities at Mirae Asset Sharekhan. Views expressed are his own.)