COMEX gold rose 3 percent to end April at $ 1,767/oz as the yellow metal continued to get affected by the trend in bond yields and the US dollar index.
MCX June gold contract rose 4 percent in April outperforming international counterparts. The rupee depreciated by around 1.25 percent against the dollar supporting domestic gold prices.
The trend in dollar effected gold prices and may continue in the near term unless there is more clarity about Fed’s monetary policy stance.
The dollar index slumped to its lowest since late February post FOMC decision but saw some pullback later in the month on back of stable bond yields, US economic optimism and debate over the Fed’s monetary policy in the light of rising inflation pressure and some hawkish comments.
The US Fed kept monetary policy unchanged in line with market expectations. The Fed also said that interest rates may remain low for a long time and played down inflation risks while strengthening the outlook for US economy.
Amid other factors, gold is getting support from US stimulus measures, loose monetary policy stance of major central banks, resurgence in virus cases and mixed economic data from major economies. However, gains are being capped by weaker investor interest, general progress on vaccine front and concerns about consumer demand amid rising virus cases in India.
The volatility is partly reflective of the mixed trade in US dollar as market players try to assess Fed’s monetary policy stance. Outlook for US economy improved significantly owing to progress on the vaccination front and hopes of additional stimulus measures. This, along with signs of rising price pressure, made a case for Fed to consider monetary tightening.
Market players may continue to assess how economies will fare and the impact of the massive monetary and fiscal expansion done over last one year.
Since the bulls failed take Comex gold past $ 1,800/oz, the upward momentum has come to a halt amid mixed factors and volatility in the dollar.
Until the broad range of $1,745-1,800 is penetrated, the sideways trade may continue in the near term.
To conclude, $18,00 is the key level and we need a break beyond this to see a sustained rise. On the other hand, buying interest may emerge at lower levels as persisting virus risks may result in central banks emphasising on need for lower interest rate.
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