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Gold prices fall despite softer US yields, buy the dips; target prices here

Spot gold at the time of the MCX closing was trading at $2329, down 0.89per cent on the day, whereas the MCX August contract was changing hands at Rs 72,005, down 0.27per cent

gold price

Praveen Singh Mumbai

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Spot gold fell despite softer US yields as notwithstanding lower yields, a slightly firmer US Dollar weighed on it. Gold came under pressure as traders are uncertain about timing and quantum of rate cuts. 

Spot gold at the time of the MCX closing was trading at $2,329, down 0.89 per cent on the day, whereas the MCX August contract was changing hands at Rs 72,005, down 0.27per cent. Sharp appreciation in the USDINR in the wake of the close Lok Sabha election results Tuesday. 

Earlier, the metal rose to $2,353 in the Asian session before falling to $2,315 in the US session. Outside markets were weak on concerns about the US economy as data continue to remain mostly weak. Gold fell despite disappointing US data. Risk appetite was weak in emerging markets on the close election outcome in India.

Data round up

JOLTs job openings (April) stood at 8,059K as against the forecast of 8,350K, while the prior data was revised lower to 8,355K from 8,488K. Although factory orders in April rose 0.70 per cent versus the forecast of 0.60per cent, the prior data was revised lower to 0.70 per cent from 1.60 per cent. Durable goods orders (April final) at 0.60 per cent trailed the forecast of 0.6 per cent, though the ex-transport data reading of 0.40 per cent matched the forecast.

Monday's US data were also disappointing as ISM manufacturing (May) came in at 48.70 as against the forecast of 49.50. ISM prices paid at 57 and ISM new orders lagged the respective forecasts of 59 and 49.40, though ISM employment (May) showed expansion with a reading of 51.10 compared to the forecast of 48.60.

Dollar and yields

The US Dollar Index was 0.01 per cent higher at 104.06 at the time of the MCX closing. The ten-year US yields were down 1.74 per cent at 4.32 per cent. 

ETF and American gold ETF holdings

Total known global gold ETF holdings rose for the second straight day to 80.857 Moz on June 3. The US Mint said that American Eagle gold coin sales totaled 20,000 ounces in May as compared to 19,500 Oz in April and 85,000 Oz in May 2023.

Central Bank

India’s RBI moved over 100 tons of gold from the UK to domestic vaults, which shows the growing importance of gold among central bankers as the metal is seen as a hedge against geopolitical and currency volatility risks.

Upcoming US data

Today's US data on tap include ADP employment change (May), S&P Global US services PMI (May final) and ISM services (May).

Outlook

Spot gold is looking somewhat at current levels as the US recession probability is rising and yields are falling. Thus, traders are expected to buy the dips for medium to long periods.

Traders are expected to remain cautious ahead of the US ISM services and US nonfarm payroll data. Support is at $2,315 (Rs 71,500)/$2,300 (Rs 71,100) /$2,277 (Rs 70,400). Resistance is at $2,334 (Rs 72,200)/$2,350 (Rs 72,600)/$2,365 (Rs 73,100).

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

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First Published: Jun 05 2024 | 8:35 AM IST

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