Is Gold's Bullish Run About to Continue? Top Factors to Consider
Gold prices have experienced a brief pullback from their recent highs, but industry experts predict a continued bullish trend. Manav Modi, a Senior Analyst at Motilal Oswal Financial Services Ltd., offers his insights into the gold market's trajectory. Here's a breakdown of his outlook and the key factors that could influence gold's performance:
Market Dynamics and Inflation:
Gold is currently trading near $5,000, influenced by weaker-than-expected US inflation data. This data reinforced expectations of the Federal Reserve (Fed) easing monetary policy, leading to lower 10-year US Treasury yields. Market participants are pricing in nearly 50% odds of a third rate cut by December. The recent inflation report, 0.1% lower than estimates, further supports this sentiment. Additionally, comments from Kevin Warsh regarding lower policy rates add to the anticipation of two 25bp cuts in March and June, which could further compress real yields and boost gold's safe-haven appeal.
Geopolitical Risks and Demand:
Geopolitical tensions, particularly regarding Iran's nuclear program, are keeping safe-haven demand for gold high. The deployment of the USS Gerald R. Ford to the Middle East amid stalled talks is a significant factor. Meanwhile, markets are closely monitoring the potential inflationary impact of renewed tariff threats from Trump and questions surrounding the Fed's credibility.
Chinese Demand and Technical Analysis:
Despite a temporary discount, Chinese demand for gold remains strong. Shanghai warehouse stocks have surpassed 100 tonnes, indicating robust physical buying interest. From a technical perspective, MCX Gold on the daily chart exhibits a broader bullish bias, with prices holding above the key medium-term support zone of 148,000–150,000. This zone coincides with the 20-day moving average and previous breakout levels. Immediate resistance is observed around 158,000–160,000, where recent highs and supply zones cluster. A sustained close above this resistance could pave the way for new highs.
Fibonacci Retracement and Volume Patterns:
Fibonacci retracement levels suggest strong structural support near the 0.382 and 0.5 zones, around 139,000–134,000, in the event of a deeper correction. This would maintain the broader uptrend unless these levels are decisively breached. Volume patterns indicate that the recent sell-off's sharp spike wasn't followed by heavy distribution, suggesting profit booking rather than a trend reversal.
Bollinger Band Analysis:
From a Bollinger Band perspective, the price recently touched the upper band during the rally and has since cooled towards the middle band (20-SMA). This suggests volatility compression and potential base formation. If the price stabilizes above the mid-band and bands begin to expand again, it would favor a continuation of the upward move. Conversely, a decisive break below the middle band could trigger short-term corrective pressure towards lower supports.
Disclaimer and Expert Opinions:
It's important to remember that expert recommendations and market analysis are individual perspectives. These opinions do not represent the views of The Times of India.
