Gold prices opened the week on a remarkable upward trajectory, reaching unprecedented levels above $3,650 per ounce in the Spot market. This surge marks an extension of last week’s rally, bolstered by increasing speculations surrounding potential interest rate cuts by the Federal Reserve at its upcoming monetary policy meeting in September. This sentiment has gained momentum following recent disappointing data from the U.S. labor market.
Key economic indicators point towards a slowdown, with the Nonfarm Payrolls (NFP) report released on Friday revealing a decline in hiring for August, alongside a rise in the Unemployment Rate—now the highest since 2021. These developments indicate troubling trends within the labor market of the world’s largest economy, fueling further bullish sentiment towards gold.
Additionally, a backdrop of political instability in both Japan and France, coupled with ongoing geopolitical tensions, has helped sustain gold’s upward momentum, limiting any significant price corrections. Market participants are looking forward to the preliminary estimate of the annual revision of Nonfarm Payrolls expected later this week, which may impact the U.S. Dollar and the USD/JPY currency pair, potentially leading to increased volatility in gold prices.
Central banks’ growing demand for gold is another factor supporting its price increase. Recent data from the People’s Bank of China (PBoC) indicates that the institution has continued its gold purchases for a tenth consecutive month in August, although the pace has started to slow due to rising prices.
As traders anticipate the release of the U.S. Producer Price Index (PPI) and Consumer Price Index (CPI) later this week, they are bracing for new guidelines on market direction. A hotter-than-expected PPI or CPI could bolster the U.S. Dollar, potentially prompting a round of profit-taking from gold investors.
From a technical perspective, current indicators suggest that while the fundamental outlook remains bullish for gold, certain caution is warranted. The Relative Strength Index (RSI) indicates that gold is in overbought territory above the 70.0 mark, suggesting that a consolidation period or a minor pullback may be necessary before making further upward advances. Any forthcoming declines may attract dip-buyers, particularly around support levels between $3,600 and $3,540 per ounce.
In the medium term, the bullish trend is expected to persist over the next three to four weeks, with forecasts suggesting a potential target range of $3,720 to $3,750 per ounce. This projection translates to a price range of approximately Rs 1,12,000 – Rs 1,12,500 per 10 grams for the MCX futures contract.
Investors are urged to approach the market with caution, taking into account the current technical conditions while remaining attentive to evolving economic data and geopolitical developments.
