On Monday, the per tola price of 24 karat gold remained steady at Rs 240,300, as reported by the All Sindh Sarafa Jewellers Association. Similarly, the prices of 10 grams of 24 karat and 22 karat gold stayed unchanged at Rs 206,019 and Rs 188,580, respectively.
Silver prices also held firm, with per tola and 10-gram prices remaining at Rs 2,820 and Rs 2,417.70, respectively.
In the international market, the price of gold remained unchanged at $2,326 per ounce, according to the Association. This stability in both local and international markets reflects a pause in recent fluctuations, providing a moment of consistency for investors and buyers alike.
GOLD (XAU/USD) SLIDES LOWER AMID POSITIVE RISK-ON ENVIRONMENT
Gold prices declined to trade in the $2,320s on Monday as a positive risk-on environment, inherited from the Asian session, reduced the demand for the safe-haven metal. This drop comes after a temporary surge following the release of lower-than-expected US core Personal Consumption Expenditures (PCE) data on Friday, the Federal Reserve’s preferred gauge of inflation.
GOLD’S RECENT VOLATILITY
On Friday, gold prices spiked to a peak of $2,359 after the core PCE data for April showed a 0.2% month-over-month increase, lower than the forecasted 0.3%. This data initially boosted gold prices as it recalibrated market expectations for the Federal Reserve’s interest rate cuts, increasing the probability of a September rate cut to 55% from around 50%. However, gold prices quickly retreated, reflecting the market’s cautious outlook amid ongoing inflation concerns and uncertainty about the Fed’s policy direction.
SUMMER OUTLOOK FOR GOLD
According to Bart Malek, Head of Commodity Strategy at TD Securities, gold is likely to find support during the summer as investors assess potential interest rate moves by major central banks and buoyant demand from Asia. Despite gold’s decline from all-time highs in April following the Fed’s indefinite delay in expected rate cuts, the metal has found a floor. This stability is attributed to short-covering by speculators after a series of disappointing US economic data, including the lower-than-expected core PCE reading.
Malek suggests that while the Fed’s consistent lower inflation readings should support gold, no large rallies are expected in the near term. The precious metal’s movements and investor positioning will remain highly data-dependent, influenced by the Fed’s need for more evidence that their economic models accurately reflect reality and that interest rates are sufficiently restrictive to control inflation. Additionally, Asian buying, particularly from China as a hedge against currency depreciation, further supports gold prices.
TECHNICAL ANALYSIS: BEARISH SHORT-TERM TREND
Gold’s recent price action indicates a bearish short-term trend. The metal broke out of a rectangular consolidation pattern on May 29, forming a bear flag continuation pattern. This breakout suggests a downside target of $2,295, based on the 0.618 Fibonacci extrapolation of the preceding decline. The price has since declined to lower lows, recently hitting $2,314, nearing the first downside target.
The 4-hour chart for XAU/USD shows a sequence of declining peaks and troughs and a major trendline break, indicating a short-term downtrend favoring short positions. Further bearish movements could see gold falling to the $2,272-$2,277 range, corresponding to the 100% extrapolation of the move prior to the trendline break and historical support and resistance levels.
MEDIUM AND LONG-TERM OUTLOOK
Despite the bearish short-term outlook, gold’s medium and long-term trends remain bullish, suggesting a high potential for recovery. However, current price action does not support a resumption of the bullish trend. A break above the peak of the rectangular consolidation zone at $2,362 is necessary to challenge the short-term downtrend and indicate a possible reversal. Until then, further weakness in gold prices is anticipated.
