Gold hits over two-week low despite touching record highs in 2024; What’s hurting the yellow metal’s appeal?

Gold prices extended losses for a second day to hit a more than two-week low on Tuesday, April 23, as diminishing fears about an escalation of tensions in the Middle East prompted investors to book profits ahead of key US economic data this week. Spot gold fell 0.3 per cent to $2,318.90 per ounce after earlier hitting its lowest since April 5. Bullion’s March to April rally drove it up by nearly $400 to an all-time high of $2,431.29 on April 12, according to news agency Reuters.

US gold futures slipped 0.6 per cent to $2,331.80. Elsewhere, spot silver was little changed at $27.17. Auto catalyst metal platinum dipped 0.5 per cent to $912.90, while palladium gained 1.2 per cent to $1,020.75. On the multi commodity futures, gold futures dipped 0.22 per cent at ₹71,042 per gram.

Also Read: Gold prices rise 7.60% this month, 15% in YTD. How income tax rule applies on your gains?

Gold prices down: What’s denting the yellow metal’s shine?

-Israeli strikes intensified across Gaza in some of the heaviest shelling in weeks, but with fears of a wider conflict receding after Iran said last week that it had no plan to retaliate following an apparent Israeli drone attack, financial markets showed signs of sharper appetite for risk.

-According to analysts, this has meant gold, which is traditionally seen as a haven from risk, has lost ground. The market is also closely monitoring signals from the US, where inflation data and statements from the US Federal Reserve indicate that interest rates may not be cut in June.

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-Recent remarks from US Fed officials hinted at no hurry to cut rates, reducing the appeal of non-interest paying bullion. Traders now expect the first Fed rate cut to come most likely in September. The market will keep a tab on US GDP data due on Thursday and the Personal Consumption Expenditures (PCE) print on Friday for more clues on the health of the economy and the timing of cuts.

-The plunge in gold and silver prices followed the US dollar reaching fresh 34-year highs against the Japanese Yen, while the dollar index remained steady at five-month highs. Notably, gold recorded its most significant single-day decline since February 2021, slipping below $2340 per troy ounce, while silver prices fell below $27.30 per troy ounce after a recent strong rally.

Also Read: China is front and centre of gold’s record-breaking rally

Key factors influencing gold prices:

Commodity market experts highlighted that gold prices are down more than three per cent in two trading sessions, amid lack fresh triggers in the market as Israel-Iran conflict seems to have eased and focus has again turned towards inflation and central bank policies. According to experts at The Gold Bullion Company, interest rates, GBP/USD exchange rate, and US political stability are among the key reasons influencing gold prices.

Interest Rates: Changes in interest rates can impact the price of gold. Higher interest rates tend to make non-interest-bearing assets like gold less attractive to investors, leading to potential price declines.

GBP/USD Exchange Rate: Since gold is traded globally in US dollars (USD), monitoring the GBP/USD exchange rate is crucial. A strengthening British pound against the US dollar can lead to lower gold prices in British pounds, as it becomes more expensive to purchase gold in GBP terms.

US Political Stability: Political stability or instability in the US can impact investor confidence and currency valuations. Events such as elections, government policy changes, and geopolitical tensions involving the US can affect gold prices.

Also Read: Gold rate outlook: Goldman Sachs raises yellow metal price forecast to $2700 per ounce by year-end

‘’A stronger US dollar & GBP, improved economic conditions, and reduced geopolitical tensions often lead investors to seek riskier assets, diminishing demand for gold. If inflation expectations decrease or central banks signal reduced interest in gold reserves, prices may decline,” said Rick Kanda, Managing Director at The Gold Bullion Company.

Gold prices outlook: Where is the yellow metal headed?

Despite the current weakness, experts view this as a healthy correction rather than a reversal of the bullish trajectory. The future outlook for gold remains optimistic, with its ascent largely underpinned by continued central bank buying, particularly from Asian and other emerging markets. The strategic nature of these purchasing decisions is expected to sustain demand throughout 2024.

‘’Emphasizing the importance of considering indicators such as relative strength indexes (RSIs), observers suggest that after periods of overbought conditions, a period of consolidation or correction is inevitable,” said Riya Singh, Research Analyst – Currency and Commodities, Emkay Global Financial Services.

Speculation arises regarding potential interventions by Japan to bolster the weakening yen, which could inadvertently support gold’s resurgence by denting the strength of the US dollar, according to Singh.

Also Read: Why Devina Mehra is bullish on silver

Coming to MCX prices, Jateen Trivedi, VP Research Analyst – Commodity and Currency, LKP Securities said, “Gold prices experienced another decline of 850 rupees to reach 70,350 per 10 grams in MCX. This decline was attributed to a sharp drop in Comex Gold, which fell below 2,300 dollars within a span of two days.”

‘’In the coming days, gold prices in MCX may find support near the 70,000 mark. However, if prices fall below this level, another sell-off towards 68,500 could occur, as risk sentiments of middle east cools off,” added Trivedi.

Pranav Mer, Vice President, EBG – Commodity & Currency Research, JM Financial Services Ltd added that prices have breached crucial support at 70,440 and we see more correction towards 70,050-69,800, with resistance at 70,800/ 71,150.”

Rahul Kalantri, VP Commodities, Mehta Equities Ltd said, ‘’ Gold is anticipated to find support at $2,288-2,270 with resistance at $2,322-2,340, while silver’s support is expected at $26.78-26.55 and resistance at $27.27-27.45.”

‘’In terms of INR, gold has support at ₹70,720 and ₹70,550, with resistance at ₹71,450 and ₹71,610. Silver is poised to find support at ₹79,440-78,780, with resistance at ₹80,840 and ₹81,380,” added Kalantri.

​Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.