Gold rates dip ahead of US Fed meeting. Is it an opportunity for bargain buyers?

According to commodity market experts, rebound in dollar index after more than expected US economic data for the third quarter has fueled speculation that US Fed may change its stance on interest rate hike. This expectation on US Fed rate hike suppressed the yellow metal price on the weekend session and helped dollar index to rebound from its one-month low. They said that spot gold price has current support base at $1,630 whereas strong support is placed at $1,600 per ounce levels while on MCX, gold has strong support base at around ₹49,700 to ₹49,800 levels whereas it is facing resistance at around ₹51,200 levels. 

Commodity market experts went on to add that gold price today is mainly driven by global indicators and outcome of US Fed meeting would be the major trigger for precious metal price. They predicted range-bound movement in the yellow metal price till US Fed meeting outcome becomes public.

US Fed meeting

Speaking on triggers, which is dictating gold rates today, Anuj Gupta, Vice President — Research at IIFL Securities said, “Gold price is expected to trade in the range of $1630 to $1685 till outcome of the US Fed meeting, scheduled next week, become public. After more than expected US economic data for third quarter, dollar index has bounced back once again, which is the major reason for nosedive in gold rates.” Anuj Gupta of IIFL Securities went on to add that MCX gold rates are expected to remain in the range of ₹49,700 to ₹51,200 levels till outcome of US Fed meeting on rate hike is announced.”

Dollar index rebounds

On reason for dip in gold rates today, Sugandha Sachdeva, Vice President — Commodity & Currency Research at Religare Broking said, “The US economy rebounded more than expected during the third quarter, which again provided a fillip to the dollar index from one-month lows and suppressed gold prices towards the close of the week. The US economy accelerated by a 2.6 per cent annual rate from July-September after two straight quarters of a contraction amid the booming job market and despite the backdrop of widespread inflationary pressures and the steep pace of rate hikes by the US Fed.”

Strategy for gold investors

Suggesting gold investors to keep an eye on US Fed meeting outcome, Sugandha Sachdeva of Religare Broking said, “All eyes would now be on the US Fed’s policy meeting scheduled next week where markets have already priced in another 0.75 percentage point rate increase. Investors will however look for hints of a softening policy stance and a smaller rate hike at the Fed’s December meeting. Gold prices will also take cues from the crucial US jobs report for October lined up next week.”

For short term high risk traders, Anuj Gupta of IIFL Securities said that one can buy gold at current levels for ₹50,900 per 10 gm target maintaining stop loss at 50,100 levels.

Gold price today: Pivot levels you should know

The Religare expert said that gold prices may struggle for a while but find support at ₹49,700 to ₹49,800 per 10 gm zone and any dips towards the said support could be seen as buying opportunities in the coming days. On the higher side, the level of ₹51,050 per 10 gm would restrict the rally and only a convincing breach of the same could fuel further upside in the yellow metal.

Gold prices erased all the gains witnessed during the prior week to close in the negative territory by 0.78 percent. Monthly basis, the consolidation phase continues in the domestic markets while in the international markets, it was the seventh consecutive month of losses for the yellow metal. The key highlight was the broad-based decline in the dollar index during the first half of the week which buoyed risk sentiments, and also lent support to gold prices. The dismal US housing market data led to strong chatter that the US Fed is likely to slow down the pace of its rate hike campaign, prompting a downward drift in the dollar index.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.