Through Bhavik Patel
The gold market is expected to face a tough environment as rising real interest rates and a stronger US dollar will act as significant headwinds for 2021. Gold prices are expected to struggle as the US Fed is looking to change its monetary policy and will start reducing its assets by the end of this year and end in the second half of the following year. The latest economic projections show the central bank committee sees the potential for a rate hike in December 2022. There is no support for gold at this time as the rate hike will dent demand investment for gold. Gold is also not receiving support from the economic uncertainty, as Covid cases are on the decline around the world except in the United States.
US consumer confidence has shown that the US economy is on the right track and only if the economy derails will it put the brakes on the Fed’s plan to tighten monetary policies. Chinese real estate company Evergrande also might not create the contagion effect in financial markets that investors are currently feeling and that is why global equities are once again rampant, putting additional pressure on gold as participants are in fashion. risk.
The US government is grappling with extending the US debt ceiling and any delay could give gold prices a positive wind. So, next week we expect gold prices to remain under pressure as sentiment is negative as evidenced by the fact that despite the mixed flash US PMI data, gold prices failed to return.
The pace of economic growth in the United States slowed further in September after soaring in the second quarter due to labor shortages and supply constraints. Technically, gold is bearish as it is trading below $ 1,750 at the time of writing and vulnerable to the creation of new short positions if it bounces back to $ 1,775. Momentum Oscillator RSI_14 is still above 30 showing gold is not in the oversold region meaning there is still room for the downside. In MCX, support is around 45,500 and prices cannot hold above the 50 day exponential moving average. We believe levels of 45,000 to 44,000 are a good opportunity to accumulate gold.
Meanwhile, money continues to struggle as it registers higher highs and lower lows on a daily scale. It is trading at a new 2021 low and we are still bearish on the silver. As it is close to the oversold zone, we expect a technical rebound but do not see any new long positions being created at this time.
The next support for silver is at 58500-58300 in MCX and we should refrain from creating long positions for now. Gold could form a base around the 45000-44500 levels.
(Bhavik Patel, Senior Technical Research Analyst, Tradebulls Securities. The views expressed are those of the author.)