Gold increases as the dollar index retreats from a two-month high.

Gold yesterday increased by 1.1% to conclude at 60379 as the dollar index continued to decline and moved farther away from a two-month high of 103.6 the day before. Investors are keeping an eye on the debt ceiling standoff and adjusting their expectations for the Fed’s next action. GOP negotiators reportedly left a debt ceiling meeting, ending any chance of an agreement.

Fed Chair Powell also emphasized that inflation is far over the Federal Reserve’s target and reaffirmed the Fed’s commitment to getting it down to the 2% target. Markets currently predict a 36% chance of a 25 basis point increase in the fed funds rate in June. The dollar is anticipated to rise by 0.3% for the whole week, marking the second straight week of gains.

While the bullion market in top hub China experienced muted activity, a drop in local gold prices from record highs enticed some buyers back to India and forced dealers to cut discounts to a 10-week low. Compared to the $11 discount from last week, Indian merchants offered discounts of up to $5 per ounce off of official domestic rates. Sales of gold products at the Perth Mint decreased by more than 6% in April compared to March, but silver product sales reached a record high.

Technically, the market is being shorted as open interest has decreased by 7.81% to close at 9909 while prices have increased by 656 rupees. Currently, Gold is receiving support at 59904, and a move below that level could result in a test of the 59428 levels. Resistance is now anticipated to be seen at 60673, and a move above that level could result in a test of 60966.

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