Spot gold is likely to trade between $3,200-$3,400; Check trading strategy

Gold – Recovering as trade concerns linger

 

Performance:

On April 24, spot gold traded between $3,288 and $3,367 as the metal recouped some of its huge loss that occurred due to sell-off on April 22 and 23. Gold hit its fresh all time high of $3,500.10 on April 22 before it slumped as the US President toned down his rhetoric against the Fed Chair Powell and floated a possibility of slashing tariff rates on Chinese goods to 50 per cent to 65 per cent. Gold tumbled all the way to $3,260 on April 23 before it recovered on dip buying as the US Treasury Secretary Bessent said that slashed tariff rate possibility is not a unilateral proposition of the President.

 

 

The metal in Shanghai saw the largest intraday drop since 2013 as it tumbled 5.8 per cent on April 24.

 

At the time of writing, spot gold was changing hands at $3,336, up around 1.45 per cent on the day. The MCX June Gold contract was at Rs 95,884, up around 1.22 per cent on the day.

 

Data roundup:

US data released on April 24 were largely mixed as durable goods orders (March preliminary) came in at 9.2 per cent against the forecast of 2 per cent, though durables ex transportation at 0 per cent trailed the estimate of 0.3 per cent. Initial jobless claims (April 19) at 2,22,000 were in line with the forecast as continuing claims (April 12) at 18,41,000 were below the median estimate of 18,69,000. Existing home sales (March) were noted at 4.02 million, lower than the estimate of 4.13 million.

 

Upcoming data:

Major US data on tap on April 25 include University of Michigan Sentiment along with one-year and five-year inflation expectations (April final). It is to be noted that the sentiment is currently at the lowest level since June 2022, whereas inflation expectations are at the highest levels in four-five decades.

 

US Dollar and yields:

Ten-year US yields at the time of writing were hovering around 4.31 per cent,, down nearly 1.5 per cent on the day, whereas two-year yields at 3.8 per cent were down around 2 per cent. US yields have come down significantly after surging violently higher in the second week in the aftermath of intensifying trade war with China. The US Dollar Index, supported by a possibility of a trade deal with China has recovered from its cycle low of 98.01 reached on April 22, though at 99.44 it was down around 0.5 per cent on the day.

 

China allocates fresh gold import quotas to some commercial banks:

The PBoC has offered extra gold quotas to some commercial banks to meet increased demand from institutional and retail investors.

 

Turkish gold contracts trading at a huge premium:

Bloomberg reported that gold certificates traded on Borsa Istanbul in Turkey, one of the biggest gold consumers, rose to a record premium of 21 per cent over physical metal due to investors' interest.

 

ETF:

Total known global gold ETF holdings stood at 89.373MOz on April 23 as investors sold some of their holdings to book profit when gold hit $3500. Nonetheless, global gold ETF holdings are up 7.87 per cent year-to-date (Y-T-D).

 

COMEX gold inventory:

COMEX gold inventory, as on April 24, stood at 42.634MOz, down 5.39 per cent from the all-time level of 45.072MOz seen on April 4 as some of the metal is being redirected to London.

 

Outlook:

Gold has slipped after hitting a fresh record high of $3,500 as trade tension has eased to some extent. However, despite the US President Trump floating a possibility of a sharp reduction in import duties on Chinese goods, China has called for removing all unilateral tariffs and appoint a Point person to initiate trade talks. In addition, China has said that there is no trade deal talk going on presently.

 

IMF has downgraded growth outlook for the global, US and Chinese economy as tariffs increase the downside risk. The Organization sees the US economy growing by 1.8 per cent, down sharply from 2.7 per cent growth forecasted in January. Similarly, it has trimmed China’s growth forecast in 2025 by 0.6 per cent to 4 per cent as global economic growth in 2025 to be around 2.8 per cent, down nearly 0.5 per cent from the previous forecast.

 

Investors booking further profit on a possibility of a trade talk between the US and China and gold going back from New York to London may lead to further downside in the short term. However, overall, fundamentals remain compelling on risks to the global economy and vulnerability of the US economy and markets.

 

Spot gold is likely to trade between $3,200 (MCX Gold June contract ₹91,700) and $3,400 (₹98,000) in the near-term as a lot depends on US-China trade negotiations. However, as it could take a minimum of six months for a trade deal to happen between China and the US and many things can go wrong in the meantime, it is advisable to buy the dips.   

 

Interim support is at $3,260 (₹93,700), while interim resistance is at $3,372 (₹97,000).       (Disclaimer: This article is by Praveen Singh – associate VP, fundamental currencies and commodities, Mirae Asset Sharekhan. Views expressed are his own.)