Report on Gold | Globe Capital Market LTD.
25-Aug-2023
Report on Gold

Yellow metal have shown steady decline in past few weeks as sharp rise in dollar index has pressurized the prices. In medium term yellow metal on domestic bourses is expected to take support near 56000-55500 range while facing resistance near 60000.

Over view and Outlook

Yellow metal have shown steady decline in past few weeks as sharp rise in dollar index has pressurized the prices. Last month in July, gold prices registered their best monthly gain in four, helped by a weaker dollar and expectations that major global central banks are nearing a peak with interest rate hikes. The dollar index, meanwhile, posted its second straight monthly decline, making gold more attractive for other currency holders. Recent data showing signs of cooling inflation in the United States has raised expectations that the Federal Reserve was closer to ending its fastest rate hiking cycle since the 1980s. The Fed raised rates by a quarter of a percentage point in last week of July month and Chair Jerome Powell said inflation was yet to “credibly” return to its 2% target. Two European Central Bank policymakers raised the prospect of an end to the ECB’s steepest and longest string of interest rate rises, as the outlook for the euro zone economy worsened despite stubbornly high inflation.

In medium term yellow metal on domestic bourses is expected to take support near 56000-55500 range while facing resistance near 60000.

Factors impacting Gold

Gold demand patterns

Following a record-breaking start in Q1, central bank gold demand slowed significantly in Q2: global net purchases totalled 103t between April and June (-64% q/q, -35% y/y). But this has done little to diminish the strong overall central bank buying so far in 2023: H1 demand of 387t is he highest in our data series back to 2000. Turkey’s gold reserves have fallen by a net 102t y-t-d, while seven other central banks reported declines in their reserves at the end of H1. US investors continued to show a very strong appetite for gold bars and coins in Q2, with demand rising to a 13-year high of 32.2t. This took H1 demand to 65t – the strongest half-yearly total since 2008 and the highest for a first half in our entire data series.

Jewellery demand proves resilient in the face of high gold prices

In the context of the very high gold price environment, Jewellery demand has been remarkably resilient so far this year. China’s recovery from the severe 2022 consumption drought goes some way towards explaining this buoyancy, as does the investment motive that helps to drive purchases in high-carat markets including Turkey and India.

 FOMC minutes of July meeting

Federal Reserve officials were divided over the need for more interest rate hikes at the U.S. central bank’s July 25-26 meeting, with “some participants” citing the risks to the economy of pushing rates too far even as “most” policymakers continued to prioritize the battle against inflation. In general, the minutes said, Fed policymakers agreed that the level of uncertainty remained high, and that future interest rate decisions would depend on the “totality” of data arriving in “coming months” to “help clarify the extent to which the disinflation process was continuing” – a possible indication of a more patient approach to any further rises in borrowing costs.

Movement of US dollar index

Dollar index have negative correlation with the yellow metal as dollar’s bounce in recently had weighed on gold. A stronger dollar can be a weight on commodities priced in the unit, making them more expensive to users of other currencies. Dollar index can bounce towards 106-107 there by keeping the yellow metal under pressure.

Weekly  Chart of Gold (COMEX)

Analysis

COMEX Gold prices have witnessed correction since the beginning August as it faced resistance near $1960-1970 range. The next support for the prices is near $1870-1850 zone and $1800 in medium term. COMEX Gold is below 10 and 20 day moving averages .Bounce back in dollar index has resulted in correction in yellow metal.

Weekly Chart of Gold  (MCX)

Analysis

MCX Gold prices have shown steady decline since the beginning August as it faced key resistance near 59900-60000 range .Meanwhile 56000-55500 is key support zone. Any bounce back in dollar index towards 106-107 can further pressurize the yellow metal.

 

Disclosure

Globe Capital Market Limited (“GCML”) is a Stock Broker registered with BSE, NSE, USE and MSEI in all the major segments viz. Capital, F & O and CDS segments. GCML is also a Depository Participant and registered with both the Depositories viz. CDSL and NSDL. Further, GCML is a SEBI registered Portfolio Manager. GCML includes subsidiaries, group and associate companies, promoters, directors, employees and affiliates.

Globe Commodities Limited, Globe Derivatives and Securities Limited & Globe Fincap Limited are subsidiaries of GCML. Rolex Finvest Private Limited, A to Z Consultants Private Limited, A to Z Venture Capital Limited, M. Agarwal Stock Brokers Private Limited, A M Share Brokers Private Limited, Shri Adinath Advertising Company Pvt. Ltd., Orient Landbase Private Limited, Bolt Synthetic Private Limited, Price ponder Private Limited and Lakshya Impex Private Limited are associates of GCML. Globe Comex International DMCC is step down subsidiary of GCML.

This report has been prepared by GCML and published in accordance with the provisions of Regulation 19 of the Securities and Exchange Board of India (Research Analysts) Regulations, 2014, for use by the recipient as information only and is not for general circulation or public distribution. This report is not to be altered, transmitted, reproduced, copied, redistributed, uploaded, published or made available to others, in any form, in whole or in part, for any purpose without prior written permission from GCML. The projections and the forecasts described in this report are based on estimates and assumptions and are inherently subject to significant uncertainties and contingencies. Projections and forecasts are necessarily speculative in nature, and it can be expected that one or more of the estimates on which the projections are forecasts were based may not materialize or may vary significantly from actual results and such variations will likely increase over the period of time. This report should not be construed as an offer to sell or the solicitation of an offer to buy, purchase or subscribe to any securities, and neither this report nor anything contained therein shall form the basis of or be relied upon in connection with any contract or commitment whatsoever. It does not constitute a personal recommendation or take into account the particular investment objective, financial situation or needs of any individual in particular. The research analysts of GCML have adhered to the code of conduct under Regulation 24 (2) of the Securities and Exchange Board of India (Research Analysts) Regulations, 2014. The recipients of this report must make their own investment decisions, based on their own investment objectives, financial situation or needs and other factors. The recipients should consider and independently evaluate whether it is suitable for its/ his/ her/their particular circumstances and if necessary, seek professional / financial advice as there is substantial risk of loss. GCML does not take any responsibility thereof.

Any such recipient shall be responsible for conducting his/her/its/their own investigation and analysis of the information contained or referred to in this report and of evaluating the merits and risks involved in securities forming the subject matter of this report. The price and value of the investment referred to in this report and income from them may go up as well as down, and investors may realize profit/loss on their investments. Past performance is not a guide for future performance. Actual results may differ materially from those set forth in the projection.

This report has been prepared by GCML based on the information available in the public domain and other public sources believed to be reliable. Though utmost care has been taken to ensure its accuracy and completeness, no representation or warranty, express or implied is made by GCML that such information is accurate or complete and/or is independently verified. The contents of this report represent the assumptions and projections of GCML and GCML does not guarantee the accuracy or reliability of any projection, assurances or advice made herein. Nothing in this report constitutes investment, legal, accounting and/or tax advice or a representation that any investment or strategy is suitable or appropriate to recipients’ specific circumstances.

Since GCML or its associates are engaged in various financial activities, they might have financial interest or beneficial ownership in various companies including subject company/companies mentioned in the report. GCML or its associates have not received any compensation for investment banking or merchant banking from the subject company in the past 12 months. GCML or its associates might have received any compensation including brokerage services and for products or services other than investment banking or merchant banking from the subject company in the past 12 months. It is confirmed that GCML or research analyst or its associates have not managed or co-managed public offering of securities for the subject company in the past 12 months.

Research analyst or GCML or its relatives’/associates’ have no material conflict of interest at the time of publication of this report. Neither research analyst nor GCML are engaged in market making activity for the subject company. It is confirmed that research analysts do not serve as an officer, director or employee of the subject company. It is also confirmed that research analyst have not received any compensation from the subject company in the past 12 months.

No material disciplinary action has been taken on GCML by any regulatory authority impacting Equity Research Analysis activities.

The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. This information is subject to change, as per applicable law, without any prior notice. GCML reserves the right to make modifications and alternations to this statement, as may be required, from time to time.

Research analyst or GCML or its relatives’/associates’ do not have actual/beneficial ownership of 1% or more in securities of the subject company, at the end of the month immediately preceding the date of publication of the document.