Gold Trades in Narrow Ranges

Gold is trading at US$ 1840, and for almost a period of four weeks it has been hovering around this level. It has not moved much having been pulled in two directions by two powerful forces – the persistent inflationary pressures, and the rising rates. The rise in US rates has been much faster and higher than expected with the Fed turning more aggressive based on persistently high inflation numbers. This has rendered strength to the currency as the currency yields are rising too with hike in policy rates. This underlines the commitment to contain inflation, and therefore, gold may not be that well sought after as inflation may edge lower over the coming months. At the same time a strong dollar pulls down gold prices as the unit in which the buyer or seller is dealing is appreciating. In a scenario of dollar appreciation the prices of commodities which are quoted in dollars cannot move up due to the dollar strength. This is the prevailing situation, and hence the very narrow ranges in which the price is moving. The support levels for gold is at 1760 and 1730 levels, and the upside may be capped at 1930/40 levels in the near term.


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