Gold prices have experienced some profit-taking in the last few sessions due to diminishing prospects of rate cuts by the US Federal Reserve. The hawkish tone in the minutes of the latest Fed policy meeting has raised concerns that policymakers will not lower rates in the near future.

The minutes showed Fed officials are convinced it would take longer than previously expected to gain confidence that inflation was moving sustainably towards the Fed’s target of 2 per cent.

Also Read: US Federal Reserve minutes show officials rally around higher-for-longer rates

MCX Gold traded lacklustre in the morning on Friday, May 24, tracking weak global cues. According to Reuters, gold prices in international markets hit a two-week low on Friday and were set for their biggest weekly loss in nearly eight months.

Also Read: Gold slips to over one-week low on hawkish Fed, US data

Around 11:45 am, MCX Gold traded 0.02 per cent lower at ₹71,565 per 10 grams.

Also Read: Gold pulls back from record highs, drops by ₹2,256 over 3 sessions on profit booking

Why are gold prices falling?Gold prices are falling due to profit booking as investors believe the US Fed will not cut interest rates anytime soon and the rate reduction later this year will be shallow.

Rahul Kalantri, VP of commodities at Mehta Equities, pointed out that gold prices are falling as investors have downgraded expectations of Fed rate cuts following the previous US economic release.

“S&P Global’s May flash readings of the manufacturing, services, and composite PMIs reveal that US economic activity is increasing. At the same time, the number of Americans filing jobless claims was lower than predicted, indicating that the labour market is strong. This followed the Fed’s May meeting minutes, highlighting lingering concerns over sticky inflation, with some members suggesting a willingness to raise interest rates if price growth continued,” Kalantri observed.

Besides, the rise in the US dollar and bond yields have dented gold’s safe-haven appeal. Surging equity markets are another factor that seems to have lured investors to riskier assets.

Also Read: Gold and silver prices today on 24-05-2024: Check latest rates in your city

What is the outlook for gold prices?Naveen Mathur, the director of commodities and currencies at Anand Rathi Shares and Stock Brokers, believes that with US general elections due in November and inflation remaining sticky, declining possibilities of a rate cut might keep the yellow metal under pressure in the short term. This would lead gold prices to test their strong support around ₹70,200 – ₹69,800 per 10 gm in the MCX July futures contract.

However, Mathur added that the downside may not persist next month amid geopolitical tensions. Moreover, long-term fundamentals are supportive of gold prices, and gold may continue to witness buying at lower levels.

Mathur expects new highs for gold in the next one to two months.

According to Kalantri, gold prices look poised for support around the $2,305 and $2,274 levels, with resistance is expected near $2,350. Similarly,

in the domestic market, Gold MCX prices are anticipated to find support at ₹70,800 and ₹70,100, while resistance is at ₹72,340 level.

“Short-term traders might find a ‘sell on jump’ strategy advantageous. Conversely, long-term investors are advised to wait and watch for fresh buying opportunities. Overall, the outlook remains bullish for the long term, suggesting a positive trajectory for gold prices despite potential short-term fluctuations,” said Kalantri.

According to brokerage firm SMC Global Securities, on COMEX, gold prices face resistance near $2,450. Gold is hovering near the support zone of $2,320. The decline could extend towards $2,280 if prices break below this level. If they fail to break, a reversal towards resistance is likely.

SMC Global said gold prices on MCX may continue to witness mixed movements, with a possible trading range of ₹70,000-73,000 next week.

Also Read: Explained: Why are central banks accumulating gold in large quantities?

Disclaimer: The views and recommendations above are those of individual analysts, experts, and brokerage firms, not Mint. We advise investors to consult certified experts before making any investment decisions.

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