Nov 22 2018

Gold: The Shine Is Back

Gold prices rose to a two-week high yesterday as the dollar lost some of its ground. The uncertainty on the pace of interest rate hikes by the U.S. Fed also seems to be supporting the yellow metal. Dollar has been under pressure this week as cautious comments by Fed officials about a potential global slowdown raised doubts on the pace of rate hikes, especially in 2019. US weekly jobless claims rose to a more than four-month high and new orders for U.S.-made capital goods were unexpectedly flat in October. These weaker economic data from US is strengthening gold prices further.

 

In the past two months, spot gold made a high of $1243 on 26 October and a low of $1180 on September 28. Most likely, the low will not see a newer low for the remaining of calendar 2018. Whereas, a break above $1243 may see it hitting $1260.  Zone around 1245 would act as a major resistance hurdle for the gold.

Demand for safe haven currencies declined after a rebound in global equities and the euro strengthened on hopes for a resolution of Italy’s budget dispute. This also lend support to the gold, which made a smart gain of about $31 in a week’s time from $1196 to $1227. A fourth Fed rate hike for this year is expected next month and policymakers had earlier indicated two more by June 2019. However, a global slowdown is creating some doubts over a total four rate hikes (25 basis each totaling 100 basis) by Fed in the year 2019. Gold has been holding up well amid a weaker dollar, geopolitical tensions like Brexit, the U.S.-China trade war and an unconvincing stock market.

Gold prices have seen some smart recovery after testing $1180 in October end. Further escalation of geopolitical tensions, soft economic data from US and falling equities is likely to augur well for the gold. The expected range for the gold spot prices for the remaining of the calendar year 2018 is $1205 to $ 1245.