By Bhavik Patel
Market was waiting for the US. consumer price index data which came yesterday. The price of gold and silver increased significantly after the release of a somewhat below-expected U.S. inflation data.
Yesterday’s declines in the US Treasury yields and the US dollar index benefited bulls in the precious metals market. Today Silver hit all-time high in MCX while gold in COMEX is within sniffing distance of $2400. U.S. consumer price index report for April saw CPI up 0.3% versus the consensus forecast of up 0.4% and compares to the March report showing a rise of 0.4%.
The CPI data released supports the monetary policy doves, who believe that interest rates should be lowered by the Federal Reserve as soon as possible. From the standpoint of consumer and commercial demand, that scenario is bullish for precious metals.
This reads really well. Although it won’t inspire the Fed to lower interest rates, it will quiet concerns about troublesome inflation and more rate hikes. When you combine it with the dismal retail sales statistics from today, an image of the economy slowing is beginning to take shape.
We believe Fed might be induced to cut rates in September although Fed still is stubborn in not jumping the gun and start lowering rates. While Powell pointed to the progress that was made on inflation in 2023, he acknowledged that this year has not continued the positive trend.
Now that major trigger for precious metal is over, we believe gold does not have any negative trigger in the short term. Only correction is expected on the base of regular profit booking.
Despite gold market near to its all time high in MCX, momentum oscillator RSI_14 is not showing any overbought zone indicating market has room on the upside. Instead of chasing the prices at such high levels, we believe one can wait for correction around 72200 for long position with expected upside target of 73500 and stoploss of 71500.
(Bhavik Patel is a Sr. Commodity and Currency Research Analyst at Tradebull Securities. Views expressed are the author’s own. Please consult your financial advisor before investing.)
