Gold faces resistance at $2000-2010 amidst mixed market Signals: What next for gold?

By Bhavik Patel

Gold is near to its resistance zone of $2000-2010 and the upside momentum is drifting sideways because of lack of fresh triggers. However gold is expected to remain positive on back of various combinations of factors. One of them is being expectations that the Federal Reserve might have concluded raising interest rates.

Second is the geopolitical landscape still contains an excessive amount of uncertainty and risk due to the war in the Middle East and Ukraine although the war premium has eroded. Third, a report by the World Gold Council revealed intensified buying by central banks around the world resulting in a new record for purchases in the first nine months of the year. Lastly, except for the Federal Reserve, global central banks are predicting a path in 2024 for cutting rates.

The market saw that as the Fed continuing to hold off on raising interest rates for a few months while it considers new economic data. We saw gold moving atleast 1% up next day as it is clear that US Fed is done with rate hikes. Another reason for the rally on Thursday was the weak US home sales. The data indicates that the economy in the United States has been contracting as a result of recent rate hikes by the Federal Reserve.

Our technical studies indicate that should gold continue to move higher the first level of resistance occurs at approximately $2040 in COMEX. This is based on a double top in which the first occurrence was on Thursday, June 1 and the second instance occurred on Friday, October 27. On both occasions, gold traded to $2040 before entering a shallow correction. Currently we only expect any breakout above $2010 if US Fed indicates dovish or neutral stance.

If it continues to maintain hawkish note, then we may see gold prices drifting downwards as it is near to its resistance zone. In MCX, one should wait for correction around 60500-60000 before taking long position with stoploss of 59500 and expected target of 61200-61300. Any long position should be kept light and with strict stoploss.

(Bhavik Patel is a commodity and currency analyst at Tradebull Securities. Views expressed are the author’s own. Please consult your financial advisor before investing.)