Unless a convincing clarity emerges on the Hormuz issue, rallies could be used to sell.
Gold price prediction today: Gold prices are under extreme pressure and any rallies can be seen as an opportunity to sell, says Praveen Singh, Head Currencies and Commodities, Mirae Asset ShareKhan. Here’s what he has to say:
Gold Performance:
- In the week ending September 25, spot gold fell 2% to $4286 as US yields and Dollar Index spiked higher amid elevated oil prices. The US and Iran remained poles apart in their respective stands in the ongoing conflict that kept oil prices supported.
- Reeling under tremendous selling pressure, the shiny metal extended its sharp losses at the start of the week as the US President Trump rejected Iran’s 7-day proposal that would have enabled it to reach a phased deal to open the Strait of Hormuz.
- The shiny metal slumped to $4111 Monday, lowest since August 5 before cutting some of its losses on CNN’s report that Trump was open to sanctions relief to Iran on nuclear issues. However, lack of clarity kept the metal in check.
- Spot gold at the time of writing this article on Monday night was trading with a huge daily loss of nearly 4% at $4130.
Trump-Xi Summit:
- China’s President Xi Jinping’s three-day state visit to the US concluded on September 25 achieved little in crucial areas of AI, geopolitics, and technology.
- The US and China agreed to extend the existing bilateral trade truce by two months to January 10, 2027, as they struck a deal to reduce tariffs on around $30 billion worth of imports from each other.
Geopolitics and oil:
- Crude oil prices reversed Friday’s slide of 2.13% and rose sharply on Monday on uncertainty over the Hormuz situation before erasing its intra-day gains on CNN citing a US official that Trump was open to offer some relief to Iran on nuclear issues. However, Iranian officials said there was little chance of reaching a deal with the US before the Midterm elections in November and it was highly probable that the US may escalate the conflict after November 3.
- Qatari mediators are expected to hold talks with Iran and the US Monday or Tuesday as Trump said that talks may resume this week.
- Saudi Arabia has restored most of the flow through its East West pipeline that was damaged in drone attacks earlier this month. Nearly 3.5 mbpd is presently flowing through the pipeline that has a nameplate capacity of 7 mbpd with 5 mbpd meant for exports. As the country was using the Hormuz route when the pipeline was out of order, traders will closely watch the barrels that Saudi can manage to get through the Strait of Hormuz.
- Brent oil futures at $104.45 were up 0.6% last week.
- At the time of writing, oil futures were trading little changed at $104.77. Intra-day high was $108.83.
Data roundup:
- The US data calendar was light on September 28. Dallas Fed manufacturing Activity (September), only data released Monday, came in at 9.8, Vs the estimate of 7.8 and prior 11.60.
- China’s industrial profit rose 4.2% y-o-y in August as compared with 11.2% in July.
Fed rate hike probability:
- Markets assign a probability of 68% to the event of the Fed hiking rate at its October 28 FOMC meeting. Market participants see the US central bank raising rates twice by January 2027 and nearly 4 times in a year.
ETF flows and COMEX inventory:
- ETF flows continue to remain quite encouraging as total known global holdings have risen to 100.80 Moz, up 58 tons YTD. Holdings have surged quite sharply from the cycle low of 96.16 Moz reached on July 20 as investors piled up into the metal on strategic allocation in corrections and hopes that the Iran war may end soon. Overall, holdings are now down merely 3.74 tons from the cycle peak of 100.92 Moz seen just before the beginning of the Iran war.
Dollar Index and yields:
- Like crude oil, dollar Index reversed its Friday’s slide to trade higher on Monday. At the time of writing, the Index was trading with a gain of 0.20% at 101.15 as US yields continued to move higher. In the week ending September 25, Dollar Index was up 0.7% as it closed at 100.97 Friday — highest weekly close since July 24.
- Two-year US yields surged to a fresh cycle high of 4.95% on September 28, highest since May 30, 2024. At the time of writing, twos at 4.93% were up 1.64% for the day. Likewise, ten-year yields hit a fresh cycle high of 5.27% Monday — highest since mid-2007– and at the time of writing were hovering around 5.25%, up 1.74% for the day.
- Yields shifted higher across the curve as 30-year yields rose over 1% to hit 5.56% — highest since May 2024.
CFTC positioning:
- In the week ending September 22, money managers decreased their bullish gold bets by 5,726 net-long positions to 131,334 lots, the least bullish position in eight weeks, according to weekly CFTC data on futures and options.
- Long-only positions fell 6,530 lots to 139,307 lots, while short-only positions down 804 lots to 7,973 were at the lowest in about 20 months.
Upcoming data:
- This week has got a lot of crucial data on the deck. Important data to be released this week include September Conference Board Consumer confidence (September 29), August JOLTs job openings (September 29), September ADP employment change (September 30), August PCE Price Index (September 30), final reading of Q2 GDP (September 30), September ISM manufacturing (October 1) and September nonfarm payroll report (October 2).
- Out of Europe, focus will be on Eurozone’s September final S&P manufacturing PMI September and CPI data to be released on October 1 and October 2, respectively. Traders will monitor UK’s 2Q final GDP (September 30) and S&P manufacturing PMI (October 1), too.
- China’s September manufacturing and non-manufacturing PMIs will be released on September 30.
Gold Price Outlook:
- Gold is under extreme downside pressure on exponential rise in real yields and a firmer US Dollar on robust US data and hawkish Federal Reserve. It is to be noted that the Fed officials continue to maintain a hawkish view post-FOMC decision.
- Having fallen through the crucial support zone of $4185-$4200, the metal is susceptible to further losses unless oil prices retreat sharply or some crucial US data disappoint badly; thus, the upcoming September nonfarm payroll report due on October 2will be quite influential in determining direction and level of gold prices.
- Bears eye a test of support in $4000-$4030 zone. Resistance is in the $4300-$4335 band. Interim resistance is at $4185-$4200.
- Unless a convincing clarity emerges on the Hormuz issue, rallies could be used to sell.
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