After experiencing a significant drop in response to unexpectedly high US inflation data, gold prices in the local bullion market saw a modest recovery on Thursday. The 24-karat gold price edged up by Rs300, closing at Rs211,100 per tola, as reported by the Karachi Sarafa Association. This increment marks a cautious optimism in the market, following a turbulent session that saw gold prices tumbling below the psychological threshold of $2,000 on the international stage and losing PKR 3500 a day earlier in the domestic market.

TECHNICAL INSIGHTS ON GOLD PRICES (XAUUSD)

On the technical front, gold prices closed below the crucial 100-day Simple Moving Average (SMA) at $1,993, signaling potential for further declines. This move below a key support level has opened the floor for additional downside risks. The 14-day Relative Strength Index (RSI), while showing signs of recovery, remains below the neutral midline. This suggests that any potential rebound in gold prices might be short-lived, reinforcing a bearish outlook in the near term.

The confirmation of a Bear Cross between the 21-day and 50-day SMAs last week further supports the bearish sentiment among gold sellers. Given these indicators, any temporary corrective upside is likely viewed as an opportunity to ‘sell the bounce.’

Key technical support levels are identified at the December 13 low of $1,973 and the 200-day SMA at $1,966. A breach below this latter level could expose the $1,950 psychological mark to downside risks. Conversely, a rebound above the 100-day SMA at $1,993 could trigger a recovery towards the 21-day SMA of $2,024, with the immediate hurdle being the $2,000 mark.

XAUUSD posted an intraday high of $1996.41 and intraday low of $1990.32. Gold is currently trading at $1996.09 (2:50pm Thursday, 15 February 2024 (GMT+5) Time in Pakistan). A day earlier gold was trading at $1992.90 (9:58pm Wednesday, 14 February 2024 (GMT+5) Time in Pakistan).

GOLD TECHNICAL ANALYSIS AND TRADING CHART

FUNDAMENTAL FACTORS AT PLAY (XAUUSD)

The market’s mood is influenced by a mix of optimism and caution as investors parse through comments from Federal Reserve officials and assess the implications for future monetary policy. The recent strong US Nonfarm Payrolls (NFP) and Consumer Price Index (CPI) data have contributed to a sense of uncertainty regarding the timing of expected Federal Reserve rate cuts, affecting both the US Dollar and Treasury yields.

Fed Vice Chair for Supervision Michael Barr’s recent remarks highlight the unpredictable path back to a 2% inflation rate, advocating for a cautious approach to policy normalization. This perspective underscores the ongoing debate within the Fed regarding the balance between combating inflation and supporting economic growth.

Moreover, global economic concerns, such as Japan’s unexpected slip into recession, add another layer of complexity. These fears may bolster gold’s status as a traditional safe haven. Upcoming US economic data, including Retail Sales and Jobless Claims, will be closely watched for indications of consumer demand and potential shifts in Fed rate cut expectations.

A GLIMMER OF RECOVERY IN GOLD PRICES IN PAKISTAN

The local bullion market’s resilience is highlighted by the increase in the price of 10-gram 24-karat gold, which rose by Rs257 to settle at Rs180,984. However, the price adjustment for 22-karat gold followed a different trajectory, slightly decreasing to Rs165,902 for 10 grams. This nuanced price movement reflects the intricate dynamics influencing the precious metals market, including investor sentiment and macroeconomic indicators.

SILVER PRICES HOLD STEADY

In contrast to the volatility observed in the gold market, silver prices maintained stability in today’s trading session. The price for 24-karat silver per tola remained at Rs2,580, with the 10-gram rate also unchanged at Rs2,211.93. This steadiness in silver prices amidst gold’s fluctuation underscores the varying factors that can impact different precious metals differently.

NAVIGATING MARKET UNCERTAINTIES

Investors are currently grappling with mixed signals, pricing in no rate cut for March and a less than 50% chance of easing in May, with expectations leaning towards a pivot in June. The upcoming US Retail Sales data and Federal Reserve officials’ speeches will be critical in shaping market sentiment and the trajectory of gold prices.

In summary, the gold market is at a crossroads, influenced by both technical breakdowns and fundamental uncertainties. Investors and traders must navigate this landscape with a keen understanding of the interplay between market indicators and economic signals to make informed decisions in the evolving gold market.

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