Gold price prediction: Gold prices are trading within a range due to fall in demand for safe haven assets. As the Donald Trump administration finalises trade deals, global economic uncertainties are somewhat ebbing, leading to gold prices declining. Praveen Singh, Senior Fundamental Research Analyst- Currencies and Commodities at Mirae Asset Sharekhan shares his views on gold price outlook and what levels investors should watch out for:Gold Price Performance:
- On July 28, spot gold extended its decline to the fourth straight day as the European Union (EU) and the US announced that a trade deal framework has been reached under which 70% of the EU exports to the US will be subjected to 15% tariffs while reducing tariffs on some American goods to zero. In addition, the EU will buy huge amounts of US military equipment, invest fresh $600 billion in the US and purchase $750 billion of American energy products.
- Although the US-EU trade deal has removed some uncertainty in the markets and mitigated risks to the global economy to an extent, some of the EU officials have criticized the deal as a compromise as even a 15% tariff rate will have significant negative consequences for the European economy.
- Spot gold fell on reduced safe haven demand and a stronger US Dollar as the Euro tumbled on possible negative impacts of the deal on the Bloc’s economy.
- The yellow metal fell nearly 0.35% in the week ending July 25; thus, posting its second straight weekly decline.
- The shiny metal at the time of writing was changing hands at $3314, down 0.68% for the day. The MCX October gold contract at Rs 98,400 was down around 0.35%.
Trade developments:
- Following the deal with the EU, the effective US tariff rate stands at 16% currently, highest since the 1930s and six times the rate when Trump took office at the start of the year.
- The US and China began two-day trade negotiation talks in Stockholm Monday. Chinese Vice Premier He Lifeng and US Treasury Secretary Bessent will lead their delegations as the agenda is expected to include extension of current tariff truce, fentanyl trafficking and China buying sanctioned Russian and Iranian oil.
- India-US trade deal agreement is yet to be reached.
- President Trump said that he may impose 15-20% tariffs on the nations which have yet to reach trade agreements.
US Dollar and yields:
- The
US Dollar Index extended its rebound for the third consecutive day on Monday as the Euro slumped nearly 1%. - At the time of writing this article, the Index was noted at 98.41, up around 0.80% on the day. It is up nearly 1.60% in July, which is turning out to be its best month this year so far.
- Ten-year US yields that fell around 3 bps last week, were up by 2 bps on Monday as the yields hovered around 4.41%.
- Thirty-year yields at 4.95% were up 2 bps, too, though 2-year yields were steady at 3.93%.
Geopolitics:
- US President Trump said that shortening his timeline for Russia to reach a truce to reach an agreement with Ukraine, he would make a new deadline of about 10 or 12 days and would announce it by Tuesday.
- According to defense analysts, the US, to signal Russia its commitment to the Europe’ security, has likely moved nuclear weapons to the UK for the first time since 2008.
ETF and COMEX gold stocks:
- As of July 25, total known global gold ETF holdings reached a fresh cycle-high 91.83 MOz — highest since July 31, 2023– as ETFs recorded net inflows for the fifth straight day.
- ETF holdings are up 10.77% YTD.
- COMEX gold stocks at 37.76 MOz are down over 16% from the record-high level of 45.072 MOz reached on April 4.
Upcoming data and events:
- This week is going to be quite a busy week as a raft of crucial macroeconomic data will be released amid key events like the FOMC monetary policy decision and trade news flow as the August 1 tariff deadline approaches.
- Major US data on card include JOLTs job openings (June), Conference Board Consumer Confidence (July), ADP employment change (July), Q2 GDP, nonfarm payroll report (July), University of Michigan Sentiment (July final), ISM manufacturing (July) and June’s core PCE price Index — Fed’s preferred gauge of inflation.
Gold Price Outlook:
- As per Bloomberg, despite tariff concerns, nearly 82% of the S&P 500 companies that have reported their Q2 earnings so far have beaten profit forecasts, which makes Q2 to be on track for the best quarter in four years.
- A weaker Indian Rupee offers some support to the domestic gold prices.
- Downside may be limited ahead of the FOMC’s monetary policy decision due on July 30. Concerns over US-Russia relations may lend some support to the metal.
- The Fed is expected to hold the overnight Fed Fund rate steady in the range of 4.25%-4.50%; however, investors look forward to clues on the future path of the policy, more so as the Fed Governor Waller has only recently supported the idea of beginning the rate cuts from July meeting itself.
- The US Dollar is likely to trade with a slight positive bias in the runup to the FOMC decision as markets digest the near-term implications of the
EU-US trade deal . - Investors monitor
US-China trade talks as well. - Spot gold is expected to trade with a slight bearish tilt unless US-China trade tensions surface up once again.
- Support is noted at $3292 Rs 97,700)/$3282 (Rs 97,400)/$3255 (Rs 96,600)/$3228 (Rs 95,800), while resistance comes in at $3343 (Rs 99,200)/$3375 (Rs 102,000).
- Selling into rallies with a tight stop-loss is the preferred strategy for very short-term trading.
- The US and China agreeing to extend their trade deal deadline may push the metal to $3255 in the short-term. Extension of the August 12 deadline is likely in the wake of the trade deals with Japan and the EU, though details of these deals are still awaited.
(Disclaimer: Recommendations and views on the stock market and other asset classes given by experts are their own. These opinions do not represent the views of The Times of India)
