Going ahead, the yellow metal may stay volatile due to uncertainty related to the Brexit vote.
In the yet another holiday shortened week, gold and silver traded in a very tight range. COMEX gold finished the week with 0.1 percent gains and MCX gold gained by 0.6 percent even though the dollar fell by nearly one percent as the IMF revised down its US growth forecast to 2.1 percent from 2.3 percent for 2020.
The IMF, in its global economic outlook, lowered its global growth forecast for 2019 to 3 percent, down from 3.2 percent of previous forecasts. The IMF also lowered its growth expectations for 2020 to 3.4 percent, down from 3.5 percent of its previous calculations. IMF feared global trade barriers and Brexit might push economies to further slowdown.
The US and China has finished the first phase of trade deal, but the twist is that the trade deal will not get signed before Donald Trump meets Xi in Chile at the APEC summit on November 16 and 17. US Treasury Secretary Steven Mnuchin said that an additional round of tariffs on Chinese imports will likely be imposed if a trade deal with China has not been reached by December, but he also added that he expected the agreement to go through. With this, October tariffs are off the table, but December tariffs are now in focus.
Boris Johnson, the Prime Minister of the UK, will have to get majority votes in the Parliament to get the Brexit draft passed. European Commissioner and UK PM has said the draft is fair and balanced for both the sides, but for UK PM, it is a challenging task to get majority votes back home.
According to CME's Fed-Watch Tool, there is an 85 percent change of rate cut at this month end meet. i.e., October 30. SPDR Gold ETF holding was at 925 tonnes against 921 tonnes a week ago since global markets are preparing for the Brexit outcome. In the backdrop of mixed US economic cues, the dollar nosedived in the week gone by. Empire state manufacturing index for October increased to 4 from forecast of 1. US building permits have increased to 1.387 million against 1.34 million. However, Philly Fed manufacturing index rose to 5.6 against 7.3 forecast and 12 a month ago. US' industrial production also slowed at pace of 0.4 percent as against a growth of 0.8 percent that was seen a month ago.
Going ahead, the yellow metal may stay volatile due to uncertainty related to the Brexit vote. EU leaders unanimously backed a new Brexit deal with Britain, leaving PM Boris Johnson to face a battle to secure the UK parliament's backing for the agreement if he is to take Britain out of Europe on October 31.
On the other side, The Chinese commerce ministry recently said that China hoped to reach a phased agreement with the United States over trade as early as possible, and make progress on cancelling tariffs on each others' goods. The IMF welcomed signs of de-escalation in the US-China trade tensions, but it said an urgent updating of trade rules was needed to restore strong growth to the global economy.
Next week, India will celebrate festival of lights and hence, we don't deny last minute buying since it is considered an auspicious to buy gold during these days. Since Deepawali 2018, the yellow metal on the MCX has experienced an upside of nearly 29 percent as international prices soared due to trade spats, escalating political risk, central banks' policies, investment demand and higher import duty by India. Since there is little change in the global scenario, the yellow metal is likely to stay positive in the coming week, month or quarter.
India will be on holiday on Monday due to Assembly elections in Maharashtra, but it will reopen during the evening session. US will release federal budget on October 21, existing home sales on October 22, Markit provisional manufacturing PMI of Germany, Eurozone & US, US durable goods orders, new home sales on October 23 and lastly Germany business climate on October 25. Hence from an economic data point of view also the week will be crucial for the yellow metal.
(The author is Fundamental Research Analyst - Commodities at Anand Rathi Share and Stock Brokers Limited.)Disclaimer: The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.