MCX gold may witness correction

The MCX gold prices seem to have corrected after hitting a nearly four-month high of 49220 as investors await the key economic readings out of the United States. The gold prices has found resistance in parallel to the rising greenback, and the plunge will continue if the US economic data exhibit a steady economic recovery, insisting the central bank hint at tapering the stimulus.

Later today is the US personal consumption report, which gauges inflationary pressure, the GDP and jobless claims data are due for release. The Refinitiv polls expect upbeat economic data, PCE is expected to have jumped to 2.9% year-on-year in April. So far, the surge in US consumer prices has not rattled policymakers at the Fed but an expected jump in PCE inflation could reawaken the hawks as it is the preferred inflation gauge. If US PCE comes higher then we can see a knee-jerk uptick in DXY however the in the long term the odds of the dollar index surging are very less because of the ongoing dovish commentary by Fed. While the second estimate of GDP is also expected to rise to 6.5% and initial jobless claims for last week, is expected to drop by 425,000 from 444,000.

Now despite the upbeat US economic data, the overall view for gold remains bullish as Federal Reserve officials have recently downplayed rising price pressures and affirmed their support to keep monetary policy accommodative for some time. The Fed will need more economic data and confidence to hint the market about when the tapering will start so until then the safe-haven demand in gold will remain intact.

As seen in the daily chart, MCX Gold witnessed a Falling Channel breakout and hit almost a four months high of Rs.49220/10 gms. However, we observed some profit-booking pressure at high levels and it is currently trading at 48835. The RSI indicator stands at 69.19 which is almost around the over-bought position, hence we can experience some more correction in yellow metal prices from a very short-term perspective. Crucial support is located at 48300/48250-48000 (Bollinger band’s medium level). Overall long-term view remains bullish for gold.  If it respected 48000/47950 zone then we can see upside towards 49200-50000 and then at 50600-51030. Only consistent trading below 47950 will lead prices towards 47200-47000.

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