Gold softens on strengthening dollar, manages to minimize losses; gold can correct to 58,500 levels

Gold softens on strengthening dollar, manages to minimize losses; gold can correct to 58,500 levels

By Bhavik Patel

The US Dollar has started gaining ground which has put Gold under pressure. Extreme dollar strength and exceedingly high yields in short-term Treasury Bills have been witnessed due to uncertainty surrounding negotiations to raise or suspend the debt ceiling. The US dollar has climbed higher for the last three consecutive weeks after trading to a low at the beginning of May at 101. 

One of the reasons to be bullish on gold is despite extreme dollar strength, gold has managed to slow down its fall which reveals notable demand behind the scenes. This fits into our view for imminent selling exhaustion in precious metals. Gold rate, right now, is testing its support of $1945 on COMEX and breach below that would take price till $1920 and $1898.

Gold bulls are waiting for the debt ceiling saga to play out and once the debt ceiling will be raised, then we may see gold trudging around the level of 60,200-60,600. In MCX, gold price has support around the level of 59,200 and 58,500. We believe that level would be ideal to go long as unless the debt ceiling saga does not play out, we are reluctant to recommend taking any position. Once debt ceiling has been raised then one can go long with stoploss of 58,450 and target of 60,600. If the debt ceiling is not raised within 1st June, then one can wait for correction till 58,400 before taking a long position.

(Bhavik Patel is a commodity and currency analyst at Tradebulls Securities. Views expressed are the author’s own. Please consult your financial advisor before investing.)