Weekly Outlook on Gold - 11 August 2023

Gold prices hovered near one-month lows on Friday's session, shrugging off cooler-than-expected U.S. inflation data, with bullion staying on course to wrap up its worst week in seven as the U.S. dollar and bond yields stood strong. The U.S. consumer price index climbed 3.2% on an annual basis, but was less than the Reuters poll forecast of 3.3%, released on Thursday. Following the data, traders bet that the Fed will keep rates steady in September.  

Gold trades near one month low after U.S. CPI reading

The U.S. dollar index and 10 year Treasury bond yield were both on track for their fourth consecutive weekly gain. Higher interest rates bode poorly for gold and other metals, given that they push up the opportunity cost of holding non-yielding assets. 

On the COMEX division, gold prices retreated 1.5% from the weekly high of $1981.55. The entire week, we witnessed weakness in prices. On the Friday session, the gold prices were hovering near $1950. On the daily chart, the price has traded below 100 & 50 days SMA, which suggests a bearish move for the near term. However, the momentum indicator Stochastic is moving below oversold territory, which indicates some pullback moves in the counter.

On the domestic front, MCX Gold prices moved below 100 SMA & the Middle Bollinger Band suggests the probability of further selling pressure in the near term. The momentum indicator RSI (14) shifted below the 50 mark and Stochastic witnessed a negative crossover, which is an indication of a downward trend for the short term. So, based on the above aspect, a follow-up move below 58700 could drag the prices towards 58300/58000 levels. However, on the upside, 59300 would act as immediate resistance for the counter. Traders are advised to trade cautiously for the coming week and look for a sell on rise strategy for the near term.

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