Gold trend is still down, buy Silver MCX only if it moves near Rs 60,000; Specify US employment data – News Couple

Gold trend is still down, buy Silver MCX only if it moves near Rs 60,000; Specify US employment data

Gold is still bearish as it is below the 200-day moving average

by Bhavik Patel

Gold is trading in a $1,450-$1,477 range this week as traders await Friday’s US employment data. The soft countdown has already begun to begin scaling back the $120 billion monthly Federal Reserve spending. This month’s September jobs report is critical because it will give the Federal Reserve the information needed to make a concrete decision on when to start grading and when to raise interest rates next year. The gold market was also in gear ahead yesterday due to the rally in global stock markets.

Traders and investors’ appetite for risk remained more upbeat on Thursday as US lawmakers agreed on a short-term expansion of debt limits in December. Gold has headwinds in the form of higher US Treasury yields, a strong US dollar rising in anticipation of a strong employment number and Fed actions to scale back its asset purchase program soon. Crude oil is near a 3-year high and therefore inflationary pressures are expected to increase giving the tailwind to gold prices. However, the headwind is stronger than the tail wind, so don’t expect gold to rise much. It may rise around $1800 if today’s jobs data comes in less than expected. Hedge funds also started reducing their long positions before the data.

Meanwhile, silver showed some kind of fundamental build around $22.15 levels. We’ve seen money managers cover their short positions as negative sentiment is at multi-year highs and short positions are also at multi-year highs. In general, we take conflicting views and therefore expect silver to outperform gold in the short term. Silver should be gained as the base metal packs have also gone up.

Gold is still bearish as it is below the 200 day moving average but in the short term, gold is trying to find some strength as it has crossed its 20 day moving average but is below the 50 day moving average. The 45600 level is a good support as gold got support around that level twice in August and September. Gold is facing barriers and resistance around 47250 to 47850 along the way. For any rapid rally, gold needs to break this barrier. We will wait for employment data before recommending any gold position.

Meanwhile, silver looks weaker compared to gold as it is barely touching the 20-day moving average and prices are far from the 50 and 200-day moving averages. As we mentioned that given the deep negative sentiment, we do not recommend holding silver too much and instead will look at buying opportunities near 60,000 in MCX. Above Rs 61,600, silver could go up to 63,500, so next week our pick will be silver in bullion.

(Bhavik Patel, Senior Technical Research Analyst, Tradebulls Securities. The opinions expressed are those of the author.)

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