IGI Securities Limited – Commodity News

Karachi, March 18, 2019 (PPI-OT): Gold

Technical

Based on last week’s price action and the previous week’s closing price reversal bottom at $1280.80, the direction of the April Comex gold market this week is likely to be determined by investor reaction to the major 50% level at $1293.60. Gold futures closed higher last week, confirming the previous week’s closing price reversal bottom. The market was driven higher by a drop in U.S Treasury yields. This move made the U.S Dollar a less-desirable investment, while driving up demand for dollar-denominated gold. Helping to put a cap on gold prices was increased demand for higher risk assets. Gold is currently trading inside a major long-term retracement zone at $1293.60 to $1319.70. This zone is controlling the longer-term direction of the market.

Highlights

Gold prices slipped today as equity markets gained and the dollar steadied

Renewed optimism over prospects for a U.S-China trade deal was cited as a headwind for the safe-haven metal

The dollar was steady at 96.593 after falling 0.2 percent in the previous session

The U.S central bank indicated that it will be patient as it considers more rate hikes, amid concerns over slowing global growth

Hedge funds and money managers trimmed their net long position by 6,097 contracts to 41,774

Fundamentals

Gold prices slipped today, as gains in the equity markets dented the appeal of the precious metal ahead of a U.S Federal Reserve policy meeting this week.

Spot gold was down 0.2 percent at $1,299.13 per ounce. U.S gold futures fell 0.3 percent to $1,299 an ounce. Gold, which offers no yield of its own, tends to fall out of favour among investors when interest rates rise.

Gold prices are at a key level right now, $1,290 and $1,310 are the key support and resistance levels. One of the most important drivers for gold is the U.S dollar strength and the dollar is in turn beholding to the U.S-China trade negotiations.

Investors since last year have favoured the dollar as a safe haven against the U.S-China trade war. Markets have been on the edge as a resolution to the dispute is taking longer than expected.

The precious metal though facing headwinds from riskier assets continues to demonstrate strong support amid heightened geopolitical uncertainties in the current term.

The Fed is due to announce its latest monetary policy decision on Wednesday. The central bank is widely expected to keep monetary policy unchanged at the end of its two-day policy meeting and policymakers will also update their projections for future rate hikes.

Uncertainty on the outlook for the world economy and global trade as well as a sharp US growth slowdown expected by a range of forecasters mean that markets are on a hair trigger for signals from the Fed.

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