Weekly Outlook on Gold - 24 May 2024

Gold prices have retreated from their recent record highs, experiencing a significant pullback over the last three trading sessions. The price of gold dropped from the all-time high of ₹74,442 per ten grams to a weekly low of ₹71,476 on the MCX exchange, marking a decline of 3.9% by Friday morning.

The primary reason for this decline is attributed to investors engaging in profit booking. This trend was particularly notable following the release of the Federal Reserve's meeting minutes, which suggested a lack of confidence among policymakers regarding imminent interest rate cuts. The minutes revealed that while current policy is viewed as "well positioned," some policymakers are prepared to tighten policy further if necessary. Additionally, achieving greater confidence in reaching the targeted 2% inflation rate is expected to take longer than previously anticipated.

The more hawkish tone of the Federal Reserve's minutes led to a surge in the US Dollar index, which measures the currency against six major counterparts, reaching a weekly high in the preceding session. This strengthened dollar triggered profit booking in gold, contributing to its price decline.

In the global market, central banks have also slowed their gold imports amid surging prices. Reports indicated that China's bullion imports decreased to 136 tons in April, a 30% decline from the previous month and the lowest total for the year.

Overall, the recent pullback in gold prices is driven by a combination of profit booking by investors, a stronger US Dollar, higher-than-expected UK inflation, and a slowdown in central bank gold imports. These factors have collectively contributed to the decline from record highs seen in recent sessions.

Gold's technical outlook suggests a period of consolidation with the potential for further correction if support levels fail to hold. However, as long as prices remain above 50-days Simple Moving Averages and key support of 70200, the broader uptrend remains intact. Traders should watch for signals from technical indicators and monitor geopolitical and economic developments, particularly related to interest rate expectations and inflation data, which can significantly impact gold prices.
On the downside, immediate support level to watch is at ₹71,000, and another is found at ₹70,200, which coincides with a previous consolidation zone. If prices continue to fall, the next significant support lies around ₹69,400, a level of 38.2% Fibonacci Retracement. While, immediate resistance is seen at ₹73,000 and ₹74,442, the recent high. 

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