Gold Consolidates After a Steep Decline
Spot gold has been consolidating its position following a significant sell-off earlier this week. On Monday, the precious metal suffered its largest intra-day decline in four years, dropping over 3 per cent (a $105 slide). By Tuesday, gold was attempting to stabilise, trading within a narrow range of $2,605 to $2,642 and closing at $2,620, a modest 0.20 per cent lower. The Multi Commodity Exchange (MCX) February contract traded at ₹75,973, indicating subdued market activity.
Key data and events
President-elect Donald Trump’s announcement on November 26 regarding potential tariffs on imports from Canada, Mexico, and China has rattled global markets. Trump’s plan to impose 25 per cent tariffs on Canadian and Mexican goods and an additional 10 per cent on Chinese goods is expected to have far-reaching implications for the global economy.
On the economic front, Tuesday’s US data painted a largely disappointing picture. The Philadelphia Fed Non-Manufacturing Activity Index dropped to -5.90 in November from 6 in October. Meanwhile, new home sales fell sharply to 610,000 in October, missing forecasts of 725,000 and the prior figure of 738,000. The Conference Board Consumer Confidence Index also edged lower, registering 111.70 against an expected 111.80. Lastly, the S&P CoreLogic CS 20-City Home Price Index (September) came in at a subdued 0.18 per cent, falling short of the forecast of 0.30 per cent.
US Dollar index and Yields
After Monday’s dip, the US dollar index regained some ground on Tuesday, buoyed by Trump’s tariff threats. It climbed 0.25 per cent to 107.08 at the time of writing.
US Treasury yields displayed mixed movements. Ten-year yields rose 1.08 per cent to 4.308 per cent, remaining within the lower end of their recent range. Two-year yields climbed by 0.87 per cent to 4.289 per cent.
Market focus: Upcoming data
With the US markets operating on a shortened week, an array of significant economic data is expected on November 27. This includes secondary Q3 GDP figures, preliminary durable goods orders for October, initial jobless claims, and personal income and spending data. Additionally, traders will monitor the Personal Consumption Expenditure (PCE) Price Index, the Federal Reserve’s preferred measure of inflation.
ETF holdings
Global ETF gold holdings continued their upward trend, reaching 83.194 million ounces as of November 25. This marks the fifth consecutive day of gains, reflecting steady investor demand for the yellow metal amidst market uncertainty.
Geopolitical tensions
Geopolitical tensions remain a key factor influencing gold prices. The Russia-Ukraine conflict has escalated, with Ukraine reportedly targeting Russian S-400 air defence systems and a military airfield in Kursk using ATACMS missiles. This was in retaliation to a recent Russian hypersonic missile attack on Dnipro. Moscow has vowed a severe response, raising fears of further escalation.
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Market outlook
Despite recent volatility, spot gold is finding support from safe-haven demand driven by geopolitical uncertainties and subdued Treasury yields. However, headwinds persist in the form of a strengthening US dollar, rallying risk assets, and occasional upticks in yields due to inflation and fiscal concerns.
High volatility and choppy trading conditions are expected to dominate the near term. Analysts at Sharekhan recommend adopting a “buy-on-dips” strategy, particularly as geopolitical risks could trigger sharp rallies.
The near-term trading range for gold is projected to be $2,565 (₹74,400) to $2,665 (₹77,300), with interim support at $2,600 (₹75,400). Investors are advised to monitor global developments closely, as any escalation in geopolitical tensions could significantly impact market dynamics.
Gold’s performance in the near term is likely to remain range-bound as it navigates a complex landscape of geopolitical tensions, economic data releases, and dollar movements. For traders, buying opportunities may arise during dips, especially as uncertainty persists in global markets. The metal’s resilience amidst these challenges underscores its enduring appeal as a safe-haven asset.
