Informist, Wednesday, Jul 5, 2023
By Sandeep Sinha
MUMBAI – Gold prices are likely to remain range-bound with a downward bias this month, as expectations of further rate hikes by the US Federal Reserve and the European Central Bank may weigh on safe-haven demand. Sentiment for the metal may also be hit by a rally in riskier assets, outflow from gold exchange-traded funds, and weak demand in top gold consumers India and China.
On the Multi Commodity Exchange of India, gold futures are seen at 57,000-59,470 rupees per 10 gm this month, according to the average of the estimates of 15 brokerage firms polled by Informist. On COMEX, prices are seen at $1,868.14-$1,962.42 an ounce.
The most-active August gold contract on MCX was last at 58,528 rupees per 10 gm and the same-month contract on COMEX was at $1,934.35 an ounce.
In June, the price of gold fell 2.7% on month on COMEX and 3.2% on the MCX. So far this year, however, the price is up 5.8% on COMEX and 6.2% on the domestic exchange.
"Gold prices have been under pressure for some weeks now due to the expectation of further rate hikes in the US and the Eurozone. This has also entailed declining investor interest, as can be seen from the marked fall in gold ETF holdings since the beginning of June," Carsten Fritsch, commodity analyst at Commerzbank said in a note.
Traders cut their net long futures and options positions on COMEX to 67,300 contracts as of Jun 27 from a high of 113,800 contracts in May, according to latest data from Commodity Futures Trading Commission.
In May, India's gold imports fell 42.8% on year to 63.30 tn, according to data from the Directorate General of Commercial Intelligence and Statistics. The fall was largely due to high domestic prices and fading pent-up demand.
"Jewellery demand is tepid due to high gold prices and end of wedding season," said Kumar Jain of Umedmal Tilokchand Zaveri. "Clients are exchanging scrapped and old gold jewellery with new ornament and demand for fresh jewellery sales is very subdued."
Gold holdings with SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell by 17.66 tn to 921.9 tn in June, as investors switched to riskier assets.
According to the CME FedWatch tool, markets are pricing in an 86.2% chance of the US Federal Reserve raising interest rates by 25 basis points to 5.25-5.50% at its meeting in July.
The dollar index, which measures the strength of the greenback against a basket of major currencies, is likely to strengthen ahead of the Federal Open Market Committee's interest rate decision and better-than-expected economic data from the US. A firm dollar makes precious metals priced in the greenback expensive for holders of other currencies.
"Gold is facing a difficult environment as real yields are going up and will stay up for a prolonged period as central banks keep interest rates elevated," SMC Global said in a monthly bullion outlook. "The struggling Chinese economy, weak yuan, hawkish Federal Reserve, rallying risk assets, decent US data, and consequently buoyant yields are bearish for the yellow metal," it added.
"We expect the economic environment to remain broadly supportive of gold demand in 2023. However, the interplay of inflation, local gold prices and how the monsoon plays out, will understandably shape demand this year," Metal Focus said in a report.
Investors will take cues from the interest rate decisions by the US Federal Open Market Committee, European Central Bank, and Bank of Japan. They will also await data on US non-farm payrolls, consumer price index, advance second quarter GDP, China purchasing managers' index, industrial production, consumer price index data, Eurozone flash purchasing managers’ index, and Germany’s Institute for Economic Research Business Climate Index.
Following is a summary of the poll by Informist on gold prices in May and details of estimates by respondents, in alphabetical order:
ANALYSTS/TRADERS | DOMESTIC PRICE | INTERNATIONAL PRICE |
Axis Securities | 57,000-59,000 | 1,880-1,950 |
Finlit Consulting Pvt Ltd | 57,500-60,000 | 1,890-1,980 |
Geojit Financial Services | 55,800-61,500 | 1,820-1,990 |
HDFC Securities | 56,700-60,350 | 1,840-1,975 |
ICICI Securities | 57,500-59,500 | 1,880-1,950 |
Kedia Comtrade | 57,500-58,800 | 1,860-1,980 |
Kotak Services | 57,000-59,400 | 1,886-1,980 |
LKP Securities | 56,500-59,250 | 1,870-1,950 |
Mehta Securities | 56,800-59,700 | 1,872-1,964 |
Motilal Oswal Financial Services | 57,000-60,200 | |
Prithvi Finmart | 57,500-58,800 | 1,860-1,955 |
Reliance Securities | 57,000-59,000 | 1,850-1,960 |
RiddiSiddhi Bullions Ltd | 57,500-58,700 | 1,900-1,950 |
SMC Global Securities | 56,700-58,900 | 1,890-1,950 |
Umedmal Tilokchand Zaveri | 57,000-59,000 | |
Average | 57,000-59,473.33 | 1,868.14-1,962.42 |
End
US$1 = 82.22 rupees
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Avishek Dutta
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