Gold may slide 37% from January high; stronger Yen may offer relief: Report
New Delhi, August 4
Gold could see a deeper correction if it breaks below USD 3,857/oz, with the next major support at USD 3,500/oz -- a level that would mark a decline of around 37 per cent from the January high, while stronger yen may provide some relief, according to a report by World Gold Council.
"Should weakness extend below US$3,857/oz we would see the next major support at the April/October range high at USD 3,500/oz. This would represent a decline of approximately 37 per cent from the January high which would be consistent with previous major downturns in Gold, and we would thus be alert to a more important floor being found here," it said.
As per World Gold Council, the Japanese yen's surge, supported by the first coordinated US-Japan intervention in the currency markets, could also lend support to gold. "A stronger yen and a weaker dollar could support gold if these trends persist," it said.
At the time of reporting, the yellow metal was trading at around USD 4,063.80/oz. According to the report, the London Bullion Market Association (LBMA) Gold Price PM fell 1 per cent last week to USD 4,027 per ounce, taking its year-to-date decline to 7.8 per cent.
Gold prices were influenced by changing interest rate expectations after the US Federal Reserve kept rates unchanged in a 9-3 vote, while developments in the US-Iran conflict kept oil prices and inflation concerns in focus. As investors reassessed the market outlook, inflows into gold ETFs moderated and net long positions on COMEX declined. Meanwhile, options traders cut bearish positions, partly due to the expiry of contracts, it further noted.
It further noted, while gold extended tight consolidation of the past month, it is still capped below its downtrend from early March. "Below US$3,943/oz would be seen to resolve the range lower with the next key technical support at US$3,857-3,887/oz," it said.
According to World Gold Council, investor expectations for the Fed's policy path will remain a key driver of gold. "This week, expected strength in manufacturing (Mon) and services PMIs (Wed) in July could reinforce expectations of a more hawkish Fed. However, July payroll additions (Fri) are expected to remain subdued, while signs of easing US-Iran tensions, underscored by Trump's announcement of fresh negotiations, may help temper concerns over further rate hikes," the report noted.
— ANI
Reader Comments
This is interesting. The yen getting stronger actually helping gold makes sense. But for us in India, the bigger question is what happens to gold prices in rupees. If the dollar weakens against yen, our currency dynamics change too. I hope the RBI is watching this carefully!
As someone who bought gold at the January peak, this is painful to read. 😅 But honestly, the World Gold Council's analysis is solid. The USD 3,500 support level is crucial. For Indian investors, this might actually be a good opportunity to buy the dip if you believe in gold's long-term story, especially for weddings and festivals.
Gold is deeply tied to our culture - you can't just talk about it as a commodity. But this report is a wake-up call. With the Fed keeping rates unchanged and geopolitical tensions, the uncertainty is real. I think young investors should consider gold ETFs or digital gold instead of buying jewellery with heavy making charges. That way you can actually respond to market trends.
The US-Iran situation could flip things suddenly. Trump announcing negotiations might calm oil prices, but we've seen how quickly these things change. For India, lower gold prices are actually good news for our current account deficit and the rupee. Maybe this correction is a blessing in disguise for the economy? 🤔
I've been following gold markets for 15 years, and this report's technical analysis is spot on. The USD 3,500 level corresponds to a major cyclical support. However, I'd caution Indian investors to not panic sell. Gold has always been a hedge against inflation, and with global uncertainties, the long
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