By Bhavik Patel
Inflation is here to stay, that is what the US CPI report combined with PPI suggested. Specifically rises in wholesale prices will be passed down the consumer chain which is why both CPI and PPI came higher than expected. The dramatic rise is because of an upside spike in energy costs. Crude oil had surged on the back of supply curtail by OPEC+ and that inflationary pressure is being seen in every aspect.
According to the CME’s FedWatch tool, there is currently a 97% probability that the Fed will continue the pause of rate hikes that began at the last FOMC meeting in July. The Federal Reserve has raised rates at every FOMC meeting since its March 2022 meeting when it first raised the benchmark interest rate or Fed funds rate. The probability of another pause in November has also jumped to 66.6% from 57.4% indicating the market is not expecting any rate hike soon. Yesterday the ECB hiked their rates and gave dovish comments indicating that they are done with the rate hike. This augurs well for gold.
Gold in MCX has made double bottom around the zone of 58,300 and any further weakness is only expected below that level. On the higher side, immediate resistance is at 59,000 followed by 59,500. Momentum oscillator has started turning positive but confirmation is needed as RSI_14 still is at 43 and confirmation will come above 50. Gold price is also trading below 20 and 50-day moving average underlying weakness in trend but the saving grace is gold’s resilience against strong US economic data and US dollar rally.
We have seen investors jumping to buy gold around the region of $1900 as right now gold is around its support zone, we would recommend to go long with expected target of 59,200 and stoploss of 58,300. In MCX as we have stated, a double bottom pattern is established and any breach below that would open doors till 57,500 so any long position should also be kept with a strict stop loss of 58,300 closing basis.
(Bhavik Patel is a commodity and currency analyst at Tradebull Securities. Views expressed are the author’s own. Please consult your financial advisor before investing.)
