Gold prices lack fresh triggers; what should be your near-term strategy for yellow metal?

With US election uncertainties behind us and the Fed cutting rates as anticipated, gold prices are experiencing profit-taking amid a lack of new catalysts.

Domestic spot gold prices declined nearly 3 per cent for the week ended Friday, November 8.

MCX Gold hit its record high of ₹79,775 per 10 grams on October 30. On November 8, MCX Gold for December 5 contract closed at ₹77,292, down 3.11 per cent from its record high.

In international markets, gold recorded its sharpest weekly drop in over five months, pressured by a stronger dollar as investors evaluated Donald Trump’s victory and its potential impact on US policies and interest rate trends.

The US Fed cut rates by 25 bps on November 7, just after Republican Donald Trump secured a landslide victory in the 2024 US presidential elections.

There is uncertainty about the future course of rate cuts as the Fed has signalled it will remain data-dependent while Trump's policies could cause inflation to rise.

As a Bloomberg report highlighted, Trump has publicly criticised Fed Chair Jerome Powell and even explored the possibility of firing him during his first term. Meanwhile, Trump has also promised to deploy more aggressive tariffs, crack down on immigration, and extend tax cuts. These policies could put upward pressure on prices and long-term interest rates and prompt the Fed to scale back rate reductions.

However, Powell has said that the outcome of the US election will not impact monetary policy in the near term. He also said that he would not resign from his role if asked to do so by the new US President.

What should be your near-term strategy for gold?

Experts do not appear bullish on gold prices for the near term.

Jateen Trivedi, VP Research Analyst - Commodity and Currency at LKP Securities, pointed out that the Fed's outlook, coupled with inflation trending toward the targeted 2 per cent, offered no new surprises to support gold prices as profit booking continued following Trump's election victory.

"Gold is currently facing resistance in the ₹77,250- ₹77,350 range, while a strong short-term support level is seen at ₹76,500," said Trivedi.

Rahul Kalantri, the VP of commodities at Mehta Equities, observed that the yellow metal was battered by a sharp rally in the dollar this week after Trump's victory, but the dollar retreated from four-month peaks on Thursday after the Fed cut interest rates and signalled plans for more easing.

"With most major events now concluded, an analysis of recent outcomes suggests that a 'sell on rise' strategy may benefit short-term traders," said Kalantri.

"Regarding gold prices, we anticipate potential declines to the $2,640 and $2,574 levels, while resistance is projected around $2,748. In the INR, gold prices could reach ₹76,400, and sustaining below this level may open the path toward ₹75,400, while resistance is expected at ₹78,050. Traders should monitor geopolitical developments, as any escalation may push gold prices higher," said Kalantri.

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