Any dovish tilt in Fed comments might be an upside trigger for gold prices next week

Most importantly, FOMC and ECB will be in focus next week, both widely expected to deliver a 25 bps rate hike.

Ravindra Rao, Head of Commodities at Kotak Securities

Conflicting data releases from the US confused global investors and complicated the job of Federal Reserve further.

Dollar tumbled to 101 levels earlier in the passing week as signs of stress in the banking sector coupled with weaker business spending bolstered bets of a pause in rate hike soon. However, sticky inflation and slowing growth has increased uncertainty regarding the future monetary policy trajectory, providing a much-needed boost to the dollar and helping it rebound to 102 levels.

Advance estimate of US first-quarter GDP showed a 1.1 percent annualized rate during the period, slowing from 2.6 percent in the fourth quarter. But this could not push the rate hike odds lower as US Personal consumption expenditures price index increased 4.2 percent, beating expectations of 3.7 percent. Besides, jobless claims totalled 230,000 for the week ended April 22, a decline of 16,000, hinting towards a still tight labour market. Inflation remains stubborn and hence it is unlikely to deter the Fed from raising rates in the May meeting, which is already priced in at 85 percent as per CME Fedwatch tool.

COMEX Gold surged to $2020.2 per troy ounce on safe haven buying as concerns regarding the banking sector resurfaced after the First Republic Bank reported a larger-than-expected decline in deposits in the first quarter. Following this, Bloomberg reported that US bank regulators are weighing the prospect of downgrading their private assessments of First Republic Bank, which would likely limit the bank's use of the Fed's discount window and an emergency facility launched last month. However, recovery in dollar in the later part of the week led to pullback in gold prices below $2000 per troy ounce.

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Ravindra Rao

Head - Commodity Research|Kotak Securities

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Rising odds of a recession in the US coupled with slowdown concerns in Asia are making the macro environment more challenging, thereby leading to sharp declines in risky assets including crude oil and base metals. While WTI crude oil currently near $75 a barrel is set for a sixth consecutive monthly decline, Copper, aluminium hover near four-month lows, and Zinc struggles to hold above two-year low levels of $2600 per tonne.

Chinese economic data has flashed signs of uneven recovery, latest being industrial profits which slipped 21.4 percent in the first quarter largely due to a failure of pickup in factory production to offset a further decline in prices.

Most importantly, FOMC and ECB will be in focus next week, both widely expected to deliver a 25 bps rate hike. We expect gold prices to ease a bit ahead of the FOMC, as Fed might reiterate higher rates for longer and no rate cuts in 2023. Having said that, any dovish tilt in comments might be an upside trigger for gold prices.

WTI Crude oil might witness some relief rally after a sharp fall in last two weeks. Support is near $72.60 a barrel which is expected to hold and resistance is near $77 a barrel which might attract selling. On the industrial metals front, MCX Copper has formed a piercing line bullish candlestick pattern on daily chart which will be confirmed on a close above Rs 746 per kg (May futures contract). On confirmation some bounce back in copper prices can't be ruled out.

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