Gold ticks higher in run-up to US inflation data. Should you invest?

gold prices

On Wednesday, gold prices went up a little bit as the dollar went down. Investors are keeping an eye on important US consumer price index data that will be released later today for clues about how close interest rates are to reaching their peak.

In India, the price of gold kept going up. At 1:12, the price of gold futures on the Multi Commodity Exchange, or MCX India, went up by 0.42 percent, to 60,758. The same thing happened with silver futures, which went up 0.61 percent to 75,500.

ICICI Direct, a domestic brokerage, thinks that gold prices will be stronger before the US inflation numbers come out because they will show signs of future rate hikes. “The US CPI year-over-year is expected to drop to 5.1% from the previous reading of 6%.” Later, the focus will move to important minutes from US FOMC meetings,” it said.

“MCX Gold is just above the bullish crossover of the five-day and ten-day exponential moving averages, which could help the precious metal rise to 61100.” “The trend would only change if the price closed below 59900,” the brokerage said.

“MCX Silver is expected to march towards 76200 as long as it stays above the key support at 74200,” it said about silver prices.

Gold prices have given returns of over 14% in the last year, which ended on March 30, 2023, while stock markets have been flat during this time.

“After a sharp rise at the beginning of last week, both gold and silver prices have dropped from their recent highs. This is because of strong US job data, which made people worry that the US interest rate hike cycle would start back up again. Today’s expected US CPI data would be the next short-term trigger. If it was higher than expected, precious metals would drop in price, said Rahul Agarwal, Director of Wealth Discovery/EZ Wealth.

“The next big event for precious metals would be the first week of May, when the FOMC meets to decide on the Fed rate. At this point, the consensus is for a 25 basis point rate hike, which would be a neutral signal for the metals. Anything higher would start a sell-off, and signs from the FOMC meeting that rate hike cycles will be put on hold would lead to a broader rally,” Agarwal said.

“Both gold and silver are on a bullish trend in the short and medium term. A technical breakout is sold into, but smart money is buying these metals on pullbacks,” Agarwal said.

“Gold prices are still going up, even though the dollar is weakening,” said Navneet Damani, Senior VP of Commodity Research at Motilal Oswal. “Investors are waiting for this week’s US inflation data, which could change the Fed’s plans for monetary policy.”

According to the CME Fed-Watch tool, markets are pricing in a more than 70% chance that the US central bank will raise interest rates by 25 basis points next month. This is because of the strong US employment report that came out last week.

“This week, people in the market are also keeping an eye on the minutes from the FOMC meeting, which could show where comments from Governor Powell and other officials will be important to watch. The head of the Federal Reserve Bank of New York, John Williams, said that the problems with the financial system that led the central bank to give banks a lot of credit were not the result of the Fed’s aggressive efforts to lower inflation,” Damani said.

“SPDR holdings went from 930.91 tonnes on Thursday to 933.22 tonnes on Monday, an increase of 0.25 percent. The price range on the COMEX could be between $1,985 and 2010, and prices in India could be between Rs.59,800 and Rs.60,800, Damani said.

As of 00:51 GMT, spot gold had gone up 0.1% to $2,005.18 per ounce. The price of US gold futures went up 0.1% to $2,020.10.

Spot silver was unchanged at $25.06 per ounce, palladium went up 0.7% to $1,456.08, and platinum went up 0.3% to $997.49.

The dollar index went down by 0.1%, making bullion cheaper for people with other currencies to buy.

Source: Team CurrencyVeda