Gold price outlook: Dollar Index to US GDP Data — top 5 triggers in short term
Premium- Dollar Index: This would be the major factor that may dictate gold price in short term, believe commodity market experts
Gold prices witnessed a halt after a two-week rally as prices approached near the $2000 per ounce psychological barrier at the beginning of last week. The skeptical bulls stepped back leading to an unwinding of long trades, which dragged down prices towards two-week lows. On Multi Commodity Exchange (MCX), gold price future contract for June expiry ended at ₹52,264 per 10 gm levels whereas spot gold price ended last week at $1929 per ounce levels. According to commodity market experts, outlook for gold price is still positive and any dip has to be seen as buying opportunity by precious metal investors.
Speaking on major triggers that may dictate gold price in short term; Sugandha Sachdeva, VP — Commodity & Currency Research at Religare Broking Ltd said, "At the beginning of the week, the first major one would be the outcome of the second round of the French Presidential Election, which would be watched closely by the market participants at the time of prevailing geopolitical issues in Europe. The movement of energy prices would also remain on investors’ radar to gauge the direction of inflation and in turn, gold. The Covid situation in China and the new developments associated with the crisis in Ukraine will also grab attention. The trend of the dollar index and Treasury yields will further dictate the direction of gold. Alongside, the first-quarter GDP report from the US would provide insights into the health of the economy."
Here we list out top 5 triggers that may dictate gold price in short term:
1] Dollar Index: This would be the major factor that may dictate gold price in short term. "Dollar Index has surged up to 101 levels and it is considered in overbought condition. Any tumble in Dollar Index would lead to rise in gold prices and hence gold investors are advised to keep an eye on the index," said Anuj Gupta, Vice President — Research at IIFL Securities.
2] US GDP data: The US Gross Domestic Product (GDP) release date is 28th April 2022 i.e. next week. "If there is a disappointing US GDP data, then in that case, US Fed's hawkish stance on interest rate hike may get discounted and inflation may become a big concern for the US economy. In such a scenario, demand for haven asset may go northward leading to rise in gold price across world," said Anuj Gupta.
3] French President Elections: The incumbent French president is considered as a pro-US. In case of change in leadership, there might be some negative impact on geopolitical setup, especially when the Russia-Ukraine war is underway. French poll results are crucial as change of leadership would mean rise in demand for gold in immediate short term.
4] Russia-Ukraine war: This geopolitical tension is still not over and crude oil prices are still above $100 per barrel levels. So, any Russia Ukraine news is expected to work as a major trigger for gold in short term.
"On the geopolitical front, no sign of a ceasefire is still visible even as the Russia-Ukraine war enters its third month. As the Ukraine crisis worsens, there is a growing sense of nervousness that it will further disrupt supply chains and add to the already hot inflation, while also leading to the “risk-off" impulse. This will benefit gold for its status as a safe haven as well as a hedge against inflation," said Sugandha Sachdeva of Religare Broking.
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5] Rising demand in Indian domestic market: Due to ongoing wedding season, demand for physical gold is expected to remain on the higher side creating demand supply constraint for next two months. So, rise in demand for gold is an important domestic trigger that gold investors can't afford to miss out.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.