MCX

Will gold hit 40,000?

Gold continued its rally to the highest level breaching the mark of $1500 on COMEX and made high $1522.70 first time in six years and lifetime high of Rs.38488 on MCX, as uncertainty is hovering in the market and supported by concerns of slowing global growth.

There are some key Fundamental triggers driving prices:-

  • US-China trade warOver the past year, Washington has imposed 25% tariffs on $250 billion worth of Chinese products, and Trump has announced new additional 10% tariff on the remaining $300 billion of Chinese imports to take effect on Sept.
  • Global Slowdown: The concern of slowing global growth increased after the RBI yet again cut its rate by 35bps and all the major central banks are getting dovish and are ready to cut their interest rates.
  • Slump in yields: The 10-year U.S. Treasury yields fell to their lowest since 2016 (adjacent monthly chart of US 10-Year Bond Yield) and the Euro zone government bond yields slumped to record lows, while Dutch 30-year and Irish 10-year yields turned negative for the first time.
  • Gold ETF Inflow: Holdings of the largest gold-backed exchange-traded fund (ETF), SPDR Gold Trust, rose 0.21% to 845.17 tonnes on Tuesday.
  • YUAN Devaluation: Hopes for an early settlement of the yearlong U.S.-China trade war dimmed after the United States accused China of manipulating its currency. China’s central bank on Thursday set its official Yuan midpoint below the key 7/dollar threshold for the first time since the 2008 global financial crisis.
  • Indian Rupee tumbled to 6-month low: The Indian rupee fallen over six-month low of 71.86 against the US dollar on Tuesday amid growing worries over economic slump and sustained foreign fund outflows.
  • Technical outlook: MCX Gold Dec futures shows Breakout of “Rising Channel” pattern on weekly chart. The major trend and the key fundamentals are on buy-side every dip towards the support level is a good buying opportunity. The upside rally could test up to 39800-41200 levels in upcoming months. Key Support levels remains 36500-35300.
  • Comex Gold Trading RangeThe subsequent chart depicts annual trading range of the international gold prices since 2013, when most traders indicate the bear market in precious metals began.
    The range has shifted higher this year. Gold’s trading range has shifted markedly higher in 2019. Not only has the price broken above the flat range of the prior three years, you’ll also notice a series of higher lows, a very bullish indicator.This insight is perhaps more valuable than a simple line on a chart, because it shows that gold’s full price range — both the highs and lows — is trading higher.The current surge will undoubtedly take a breather at some point, but this big-picture view clearly shows a decisive shift in momentum, one that portends higher and higher prices.                          (Source: jaytaylormedia.com)
Gold Dec Future Classic Woodie’s Camarilla DeMark’s
Resistance 3 40,626 38955
Resistance 2 39,986 39,971 38832
Resistance 1 39,286 39,256 38709 38,966
Pivot Point 38,646 38,631
Support 1 37,946 37,916 38463 37,626
Support 2 37,306 37,291 38340
Support 3 36,606 38218

Investors should lower their long-term return expectations from the equity market: Marc Faber
In a conversation with ETNOW he says “If you are a prudent investor, then you are not going to make a lot of money in equities over next three years.”
He advised investors to start accumulating gold for a long-term perspective amid global growth concerns and heightened trade tensions. Faber expects gold rise about 20 per cent over next 2-3 years. He said most of the commodities do not have a structural bull market.
“Gold is not an industrial commodity and it does not depend on demand from China. It depends on investor sentiment towards gold and central banks’ monetary policies. If they print money, then it is likely that the price of yellow metal will go up in the long run, while in the short run, it does not have much of a correlation,” Fabre said, adding that the commodity has bottomed out.

In recent months, the US Fed and 19 other central banks have already cut policy rates. With the Fed cutting rates, Faber expects the US dollar to be weaker in the next two years.

“Timing is very important if you invest in commodities”

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