How to trade gold on Akshaya Tritiya? Praveen Singh of Mirae Asset suggests

Gold – Slightly lower on further reprieve on tariff front

On April 29, spit gold swung between $3,299 and $3,349 and was changing hands at $3,322, down around 0.65 per cent on the day, at the time of writing. MCX June contract at Rs 95,640 was down by nearly 0.40 per cent.

 

Notwithstanding disappointing data out of the US, spot gold was slightly lower as US President Trump will be signing orders to remove tariffs on some of auto imports. In addition, investors are still hopeful that US-China trade tension may ease further. 

Data roundup:

US data released Tuesday were disappointing as advance trade balance (March) came in at record -$162 billion Vs the estimate of -$145b as imports surged to beat tariff deadlines. Larger than expected US trade deficit would reduce Q1 GDP as imports would get subtracted from the GDP figure. As per a Bloomberg estimate, trade may reduce close to 3 per cent points from top-line GDP growth on a surge in consumer goods imports, though gold imports need to be excluded from this calculation. 

 

 

JOLTs job openings (March) at 7192K were well short of the 7500K estimate and prior data of 7568K was revised lower. JOLTs openings have fallen to the lowest since January 2021 barring September 2024 data. JOLTs job opening rate fell from 4.5 per cent to 4.3 per cent and trailed the forecast of 4.5 per cent.

 

Conference Board Consumer Confidence (April) fell from 93.90 (revised higher from 92.90) to 86, lowest since May 2020, as expectations deteriorated the most since May 2011. Stephanie Guichard, Senior Economist, Global Indicators at The Conference Board, noted that the share of consumers expecting fewer jobs in the next six months (32.1 per cent) was nearly as high as in April 2009, in the middle of the Great Recession as expectations about future income prospects turned clearly negative for the first time in five years. The details indicate that concerns about the economy have now spread to consumers worrying about their own personal situations. 

 

Elsewhere, European Central Bank's 1-year and 3-year expectations (March) at 2.9 per cent and 3.3 per cent were hotter than respective expected data of 2.5 per cent and 2.3 per cent.

 

The ECB Governing Council member Yannis Stournaras said that the Central Bank should be cautious on further rate cuts due to the uncertain global economic environment. It is possible that the ECB may halt its rate cuts temporarily after a 25-bps cut at the next meeting.

US Dollar Index and yields:

Ten-year US yields slid nearly 1 per cent to 4.16 per cent, lowest since April 7 as weak US economic indicators boosted rate cut bets. Similarly, two-year yields eased about 1 per cent to 3.65 per cent, lowest since April 9. Despite lower yields, the US Dollar Index at 99.03 was slightly higher as hopes concerning tariffs supported the greenback. 

Upcoming data:

Major US data on tap on April 30 include ADP employment change (April), 1Q Advance GDP annualized, personal consumption (1Q Advance), Employment cost Index (1Q) and real personal spending (March). Investors will also monitor Germany's PPI and CPI (April prel.) along with China's manufacturing, non-manufacturing PMIs and Caixin China manufacturing (all April).

ETF:

Total known global gold ETF holdings as of April 28 stood at 89.072MOz, lowest since April 14, as holdings fell for the fifth straight day as investors booked profits. Nonetheless, ETF holdings are up nearly 7.5 per cent YTD. 

COMEX gold inventory:

COMEX gold inventory was noted to be 41.619MOz on April 28, down over 7 per cent from the record high inventory of 45.072MOz recorded on April 4. COMEX gold inventory may be coming down on reversal of gold flow; thus, gold going back from New York to London.

US-China trade standoff:

On April 28, US Treasury Secretary Scott Bessent said that it is up to China to take the first step to de-escalate trade tensions. However, China's Foreign Minister Wang Yi at a BRICs meeting on Monday urged countries to stand firm and resist 'bully' Trump. The Foreign Ministry has vowed that Beijing won't budge. However, investors remain hopeful that China will eventually de-escalate as Beijing suspended tariffs on some of US imports including medical equipment, plane leases and at least eight semiconductor-related products. US President Trump is expected to sign orders to exempt some auto foreign parts for cars and trucks made inside the US and give imported automobiles a reprieve from separate tariffs on aluminum and steel.

Outlook:

Major focus of investors is on US-China trade developments. Unless both the countries come together to sort out their differences, gold is likely to be well supported, though reversal of gold flow from New York to London is somewhat negative for the metal. US data continues to disappoint. Weaker than expected JOLTs opening and a multi-year low Conference Board consumer confidence data reflect a weakening economy, which would weaken further as trade war continues. Conference Board consumer confidence data fell for the fifth straight month.

 

China choosing not to respond to the US to initiate trade talks means trade friction between world’s two largest economies is likely to continue in at least near-term, which will keep the yellow metal supported.

 

If there is no major positive development on trade issues, dip buying is the preferred strategy. The metal may test $3372-$3400 resistance zone.  Upside is likely to be capped at $3400 in the short-term.

 

Support is at $3260 (MCX Gold June contract Rs 93,800). Resistance is at $3350 (Rs 96,500)/$3372 (Rs 97,000). 

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