Gold prices rose Wednesday morning in the domestic futures market, tracking positive global signals after Fitch Ratings downgraded the U.S. credit rating, shaking confidence in the U.S. economy and boosting gold as a safe haven.
In the previous session, gold prices fell around 1% in international markets to a three-week low as the dollar strengthened after strong manufacturing and construction in the United States for June.
But gold prices saw decent gains today after Fitch Ratings lowered the U.S. Long-Term Foreign-Currency Issuer Default Rating (IDR) from ‘AA+’ to ‘AAA’ with a “stable” outlook, citing fiscal deterioration over the next period. few years and a growing public debt burden.
The move could potentially affect the economy as a whole and shake investor confidence, thereby leading to negative sentiment in the market. Additionally, the downgrade may also have a negative impact on the US dollar, which is positive for gold since the yellow metal is valued in dollars. Investors prefer gold to invest in times of economic uncertainty.
MCX Gold for October delivery is trading up 0.26 percent at ₹59,544 per 10 grams around 10:10 am.
What should your gold strategy be today?
Gold prices could trade with gains today, supported by dollar weakness following Fitch’s rating downgrade.
Ravindra V. Rao, CMT, EPAT, vice president of commodity research at Kotak Titles believes gold prices could remain supported for the day as Fitch Ratings’ decision to strip the US of its top sovereign credit rating could keep safe-haven demand buoyed.
Brokerage company Motilal Oswal Financial Services thinks that gold, on MCX, could trade in a range of ₹58,800 to 59,700.
“MCX Gold is likely to trade range bound for the session. Support is placed at ₹59,380-59,200 and the resistance is at ₹59,720-59,880,” the brokerage firm said.
Manoj Kumar Jain of Prithvifinmart Commodity Research expects gold and silver prices to remain volatile this week ahead of US jobs data.
“Gold may hold its support level of $1,974 per troy ounce while silver may also hold its support level of $24.20 per troy ounce in the international markets. Gold has support between $1,974 and $1,958, while resistance lies between $1,988 and $2,000 per troy ounce. Silver has support between $24.20 and $23.84, while resistance lies between $1,974 and $2,000 per troy ounce. ranges between $24.55 and $24.84 per troy ounce,” Jain said.
“On MCX, gold benefits from support at ₹59,200-58,950 and resistance to ₹59,550-59,770 while silver sees support at ₹73,550-73,100 and resistance to ₹74,400-74,850. We suggest buying gold for around ₹59,300 with a stop loss of ₹59,080 against the target of 59,700,” Jain said.
Deveya Gaglani, Research Analyst for Commodities at Axis Securities, pointed out that gold prices ended their winning streak in the last session. On the daily chart, prices formed a large red candle and closed below the previous session’s low, by approximately ₹Level 59,411. This is a drop of more than 1 percent. The strength of the dollar index was the main reason for the sell-off in precious metals.
“It is comfortably placed above the $102.10 level. The dollar index and gold prices are inversely correlated with each other. Traders and investors are eagerly awaiting the employment data non-agricultural this week, which could influence the Fed’s rate hike decision. On the daily chart, a strong support zone is placed around the ₹59,300, and resistance is around the ₹level 59,800,” Gaglani said.
Disclaimer: The views and recommendations above are those of individual analysts and brokerage firms, and not of Mint. We advise investors to seek advice from certified experts before making any investment decisions.
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