Gold Dropped as Fed’s Waller Said He Support Another Increase in Interest Rate

  • Commodities Analysis

Gold yesterday settled down by -0.19% at 50735 as Governor Christopher Waller said he would support another increase of a similar scale at the central bank’s July meeting. Meanwhile, Cleveland Fed Bank President Loretta Mester said that the risk of a US recession is increasing and that it will take several years to return to the central bank’s 2% inflation goal. Concerns about the potential economic costs of an aggressive tightening kept markets on edge, providing some support to gold prices.
 
However, the downside seen limited amid global economic worries countered concerns around aggressive monetary tightening by the U.S. Federal Reserve, with the focus being on several central bankers' views this week. Discounts on physical gold in India narrowed, helped by some fresh buying from jewelers, while COVID-19 restrictions kept activity tepid in top consumer China. Indian dealers offered discounts of around $6 an ounce over official domestic prices compared with last week's $10 discounts. In China, gold changed hands at anywhere between discounts of $5 and $0.5 to premiums of $2 to $5 an ounce over global benchmark spot prices. In Hong Kong, gold was sold at anywhere between a discount of $1.8 an ounce to a premium of$1.50, while in Singapore, dealers charged premiums of $1.30-$1.70.
 
Technically market is under long liquidation as the market has witnessed a drop in open interest by -0.76% to settle at 12585 while prices are down -99 rupees, now Gold is getting support at 50637 and below same could see a test of 50539 levels, and resistance is now likely to be seen at 50909, a move above could see prices testing 51083.
 
Trading Ideas:
# Gold trading range for the day is 50539-51083.
# Gold remained under pressure as Governor Christopher Waller said he would support another increase of a similar scale at the central bank’s July meeting.
# However, downside seen limited amid global economic worries countered concerns around aggressive monetary tightening by the U.S. Federal Reserve
# Fed’s Mester said that the risk of a US recession is increasing and that it will take several years to return to the central bank’s 2% inflation goal.

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