COMEX Gold Shows Signs of Recovery Despite Recent Losses: RHB Investment

RHB Investment Bank provides insight into the price movement of Commodity Exchange Inc. (COMEX) Gold, which managed to stage a rebound on Friday (Oct. 6), following a series of declining sessions.

The price surged by US$13.40 (RM63.41) to close at US$1,845.20 after commencing the session at US$1,834.30.

During the trading day, the commodity established its intraday low at US$1,823.50 but then experienced a notable uptick, reaching a high of US$1,849 before closing at US$1,845.20.

This recent bullish candlestick, combined with the Relative Strength Index (RSI) below the 30% level, indicates COMEX Gold’s attempt to stage a technical rebound from an oversold region.

Should the commodity’s price surpass the resistance level at US$1,870, it has the potential to enhance market sentiment and attract additional buying pressure, thereby driving the precious metal toward the 20- and 50-day Simple Moving Average (SMA) lines.

However, RHB Investment maintains a bearish trading bias for now, pending a bullish breakout at the US$1,870 level.

Traders are advised to retain their short positions, initiated at US$1,944.20 or the closing price on September 6. To mitigate trading risks effectively, the trailing-stop threshold is adjusted lower to US$1,870 from the previous US$1,915.

The immediate support level remains unchanged at US$1,800, followed by the US$1,750 level.

On the contrary, the immediate resistance level remains at the previously mentioned US$1,870, with US$1,915 serving as the subsequent resistance marker.

Gold prices have faced a second consecutive weekly loss as 10-year bond yields surged past 4.8%. This decline in COMEX gold prices began in late September and has been primarily driven by the significant increase in US bond yields, fueled by strong economic data. Gold is now hovering near its lowest levels in seven months, influenced by the Federal Reserve’s hawkish stance, which suggests that monetary policy will remain tight for an extended period.

The yield on 10-year Treasury notes

Gold Shows Signs of Recovery Despite Recent Losses

COMEX Gold prices moved between gains and losses during the central bank week and are poised to close relatively flat, near $1,975 per troy ounce. The yellow metal declined during the first half of the week as investors remained wary ahead of the June FOMC meeting.

Despite a 1% decline in the dollar index, gold prices have not risen as US short-term treasury yields inched higher. Front-end rates rose after the CPI data and a hawkish FOMC meeting.

Dollar and Treasury yields, which tend to follow similarly.

Gold prices have had a volatile week due to the central bank meeting, mixed US economic data, and a weakening USD. The yellow metal declined at the beginning of the week due to investor wariness ahead of the June FOMC meeting, but weakened further post-meeting as the Fed delivered a “hawkish skip.”

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Signs of Recovery Despite Recent Losses:

Dollar and Treasury yields, which tend to follow a similar path, were decoupled as prospects of a nearing end to rate hikes and a hawkish ECB weighed on the greenback while odds of higher rates in the near term aided yields.

Dollar and Treasury yields, which tend to follow a similar path, were decoupled as prospects of a nearing end to rate hikes and a hawkish ECB weighed on the greenback while odds of higher rates in the near term aided yields.

US CPI data showed that headline inflation declined to 4% in May 2023, the lowest since March 2021 and slightly below market expectations of 4.1%. Energy prices slumped, while food inflation slowed.

Shelter inflation continues to be a major contributor to overall inflation numbers. However, the core CPI, which excludes

rise to between 5.6% and 6.6% in 2023, suggesting two more quarter-point rate hikes. The GDP is seen rising 1% this year, higher than the 0.4% seen in March, while growth for both 2024 and 2025 was revised lower.

However, gold prices staged a fantastic recovery on Thursday, rebounding from an intraday low of $1,936.1 per troy ounce and closing at $1,970.7 per troy ounce, as weak economic data and a hawkish ECB policy outcome led to a sharp decline in the greenback. Other than the US retail sales data, which rose 0.3% month over month in May, all the other economic indicators disappointed.

US weekly jobless claims came much higher than expectations, showing signs of a cooling labor market, while industrial output, manufacturing output, and capacity utilization came in below estimates, indicating a slowdown in the manufacturing sector.

Meanwhile, the European Central Bank raised the interest rates by another 25 bps during the June meeting, bringing the deposit facility rate to a 22-year high of 3.5%. And, during the press conference, ECB President Christine Lagarde stated that the ECB had more ground to cover and would likely continue raising rates in July, which proved to be a major blow to the greenback, boosting bullion.

Pausing the Fed funds rate along with projections for higher terminal rates gives the Fed flexibility to hike if data comes in hot and, at the same time, cut the rates if data softens. At the same time, it makes dollar movement subject to incoming economic data. After the FOMC meeting, interest rate futures pushed back expectations for rate cuts this year.

US housing data, Flash Manufacturing PMIs, Powell’s testimony, and speeches from several Fed officials will be in focus for the coming week. Hawkish Fed rhetoric might weigh down on gold prices during the first half of the week; however, prices might rebound towards the second half if PMIs and unemployment claims show signs of economic weakness.

(The author is VP-Head Commodity Research, Kotak Securities Ltd)

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. (These do not represent the views of the Economic Times.)

(Disclaimer: The opinions expressed in this column are those of the writer. (The facts and opinions expressed here do not reflect the views of www.economictimes.com.)

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