Gold prices likely to see volatility next week due to US election, Fed policy decision, say experts

Gold prices in India achieved remarkable growth for the last Samvat year, soaring nearly 32 per cent since last Diwali. This surge in gold rate was primarily driven by multiple factors, including rising geopolitical tensions, anticipation of interest rate cuts, a stable dollar index, signs of global economic slowdown, and robust demand from central banks.

While the medium-term outlook for the precious metal remains bright due to geopolitical uncertainty and the US Federal Reserve's rate cuts, experts expect high volatility due to the US election 2024 and the Fed's policy decision next week.

The market seems to have priced in a quarter per cent rate cut by the US Fed at next week’s post-election decision. An in-line policy decision may not offer a fresh trigger to bullion, but the US election in the coming week will be a decisive factor in the precious metal trend.

Gold price outlook for next week

Gold prices may experience high volatility next week as market watchers brace for the impact of two major events: the US election on November 5 and the Fed’s policy decision on November 6.

The yellow metal saw profit booking in international markets on Friday due to the rise in the US dollar and treasury yields. However, weak nonfarm payroll data supported expectations of further monetary easing by the Fed, limiting the losses for bullion.

According to Reuters, "nonfarm payrolls increased by 12,000 jobs last month, the smallest gain since December 2020, affected by disruptions from hurricanes and strikes by aerospace factory workers."

Alex Kuptsikevich, Chief Market Analyst at FxPro, underscored that gold is in its fourth consecutive week of gains. In futures, the price rose above $2800 per troy ounce, while the spot price stalled slightly as it approached this level.

"The rally began in October last year with the first signs of a monetary policy shift. In less than thirteen months, the price has risen by 50 per cent," Kuptsikevich observed.

"On a weekly basis, the RSI index has breached the 80 mark. This is only the sixth time in the last fifteen years. Corrections have always followed, with the lowest being a 5 per cent correction in April this year. On other occasions, pullbacks have been between 8 and 20 per cent. But there is an important caveat to this tactic. A signal for a correction begins when the asset returns from overbought territory; before this point, going against the trend is challenging, as price changes can be highly volatile due to waves of short-position margin calls," Kuptsikevich said.

Rahul Kalantri, VP of commodities at Mehta Equities, pointed out that after hitting a record peak, gold faced significant selling pressure on Thursday. However, it still managed to close with a fourth consecutive monthly gain.

"We're going to see a bit more volatility in the coming week. We have a lot of major impactful events next week: the US election on Tuesday, the Fed meeting on Wednesday, and the Bank of Japan (BOJ) on Thursday. So it's really not surprising to see some traders take profits. Underlying forces spurring demand for gold include geopolitical tensions and uncertainties about the election's outcome, with the market remaining in a 'buy-on-dips' trend," said Kalantri.

"Gold has support at $2,705 while resistance at $2,795. On the MCX, gold has good support at ₹77,840 while resistance at ₹79,350-79,790," Kalantri said.

According to Jateen Trivedi, VP and Research Analyst - Commodity and Currency at LKP Securities, MCX Gold faces resistance at ₹79,600, while Comex shows a hurdle near $2,790.

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