Gold prices continue to see-saw as the metal moves largely inversely to the yields. (AI image)

Gold price prediction today

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Gold is trading as a risk asset and not a safe haven asset, says Praveen Singh, Head Currencies and Commodities, Mirae Asset ShareKhan.

Gold Performance:

Gold prices continue to see-saw as the metal moves largely inversely to the yields, oil prices and the Dollar Index that continues to derive strength from elevated oil prices.

In the week ending March 27, spot gold prices eked out a weekly gain of $1 to close at $4492 as it rose by nearly 2% on Friday.

At the time of writing this article, spot gold was changing hands at $4525, up by around 0.75% for the day; the metal traded between $4420 and $4581 on March 30.

Geopolitics and oil

The US President continues to cite talks with Iran; however, the Tripoli Amphibious Ready Group – a group of about 3,500 sailors and Marines has arrived in the Middle East on an amphibious assault ship.

Iran-allied Houthi militants in Yemen entered the war over the weekend, launching missiles and drones at Israel, adding an additional front to the fighting.

In an interview with the Financial Times on March 29, Trump said he wants to take the oil in Iran, which implies occupying the country’s main export hub of Kharg Island. The Island also houses an Iranian naval base.

He is also weighing a military operation to extract nearly 400 Kgs of enriched uranium from Iran.

Data roundup:

University of Michigan consumer sentiment, released on March 27, fell to 53.3 in March-- near record lows and lagged the forecast of 54. One-year inflation expectations edged higher from 3.4% to 3.8% (forecast 3.6%), but 5-10-year inflation expectations at 3.2% lagged the forecast of 3.5%.

Unit labour cost of US rose by 4.4% (forecast 3.6%) in 4Q final reading, S&P global US PMIs were mixed in March preliminary readings as services PMI lagged the forecast and import price index rose by 1.3% (forecast 0.6%) from 0.6% in January.

Dollar Index and yields:

The US Dollar Index, which closed with a weekly gain of 0.25% at 99.92 on Friday, was trading 0.40% higher at 100.55 at the time of writing this article.

On March 27, two-year US yields climbed to 4.02%--highest since November 6, while ten-year yields surged to 4.48% -- highest since July 17 – before easing.

At the time of writing, 2-year yields were noted at 3.81%-- down by around 2.3%, while ten-year yields at 4.33% were down by 2.2%.

Powell’s speech:

Chairman Jerome Powell, participating in a moderated discussion at the Harvard University Principles of Economics Class in Cambridge on March 30, said that there is tension between the Fed's two objectives as there is a downside risk to the job market and an upside risk to inflation. However, he added that rates are in a good place to react to rising oil prices.

US recession risk and rate hike odds:

The probability of the US economy entering a recession in the next twelve months has risen from 20% before the Iran war started to 30% currently.

Fed Fund futures now imply 0.17 cuts by the end of the year 2026, a sharp reversal from 0.57 rate hikes as seen on March 26.

Turkey sells gold:

Turkey monetized its gold reserves in the first two weeks of March as it sold and swapped about 60 tons of gold -- worth more than $8 billion-- as the Iran war is leading to a surge in energy import costs and tight liquidity. Turkey’s central bank, which held 603 tons of gold at the end of January, has been monetizing gold to shield its beleaguered currency Lira.

It is to be noted that the National Bank of Poland, the biggest buyer among the world’s central banks for the last two years, has been contemplating monetizing its gold to support its defence expenses.

ETF and COMEX inventory:

As of March 27, total known global gold ETF holdings stood at 98.06 MOz as investors continued to exit their ETF positions. Gold ETF holdings are down nearly 0.89 MOz YTD and have fallen by 2.86 Moz (89 tons) since the Iran war started.

Registered COMEX gold inventory at 16.61 MOz is currently at the lowest level in more than a year.

CFTC data:

As per the latest CFTC data, money managers decreased their bullish gold bets by 13,145 net-long positions to 92,775 in the week ending March 24. The net-long position was the least bullish in about five months. Long-only positions fell to the lowest in six weeks, while short-only positions rose 1,648 lots to 26,965 – the highest in almost four months.

Upcoming data:

Major US data on tap include Conference Board Consumer Confidence (March 31), JOLTs job openings (March 31), ADP employment change (April 1), ISM manufacturing (April 1), retail sales (April 1), trade balance (April 2), nonfarm payroll (April 3) and S&P global US services PMI (April 3).

Traders will also keep a tab on UK's 4Q final GDP (March 31) and manufacturing PMI (April 1), Eurozone's manufacturing PMI (April 1), China's national PMIs (March 31) and ratingDog PMIs (April 1 and April 3).

Gold Price Outlook

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USDINR climbed to a fresh record high of 95.58 on a surge in oil prices and weak equities. Weak domestic currency cushions the downside in domestic gold prices.

Gold’s recovery on March 27 and March 30 has been driven primarily by slide in yields as rate hike odds by the year-end flipped into rate cut possibility.

Gold is currently trading more like a risk asset than a safe haven asset. Sharp surge in oil prices will intensify downside pressure on the metal.

This week is crucial for the markets as the nonfarm payroll for March will be released on April 3. Expectations of a weak job report will keep the upside in yields capped; thus, downside in gold may be limited unless oil prices surge sharply higher further.

Further gold selling by central banks is possible should the US Dollar and oil continue to firm up.

Overall, we expect the yellow metal to range trade between $4200 and $4610 unless oil prices spike sharply higher.

Traders may play the range. Interim support is at $4370. A weak job report and contained oil prices can help the metal to test the resistance at $4840.

(Disclaimer: Recommendations and views on the stock market, other asset classes or personal finance management tips given by experts are their own. These opinions do not represent the views of The Times of India)