As gold scales new peaks, traders eye inflation data and ECB for next big move

A weaker US dollar and expectations of a Fed rate cut pushed gold to record highs, while looming inflation figures and geopolitical tensions are set to shape its next move.

New Delhi: After scaling record highs last week, gold prices may face some short-term profit booking, with the precious metal’s future direction dependent on upcoming global economic indicators like US and domestic inflation data, and the European Central Bank's policy meeting, according to analysts.

Bullion traders will also closely monitor macroeconomic data, including the US Producer Price Index and speech of the European Central Bank's (ECB) President Christine Lagarde, they added.

"Going into the week ahead, the focus will be on the inflation numbers from China, the US, Germany and India, along with American consumer sentiment data. Adding to that would be the European Central Bank's policy meeting on Thursday, as well as Chinese inflation data, which will be closely watched," Pranav Mer, Vice President, EBG - Commodity & Currency Research, JM Financial Services, said.

On the Multi Commodity Exchange (MCX), the October contract of gold surged Rs 1,131 or 1.06 per cent to touch a lifetime high of Rs 1,07,807 per 10 grams before ending marginally lower at Rs 1,07,740 per 10 grams.

Similarly, the December delivery contract jumped Rs 1,127 or 1.04 per cent to mark a new record of Rs 1,08,840 per 10 grams, and finally settled at Rs 1,08,775 per 10 grams on Friday.

In the last week, gold prices have risen nearly Rs 4,000 per 10 grams or 3.81 per cent.

Gold's record bull run continued as prices ended the week at yet another all-time high with continued support from strong exchange-traded fund inflows and persistent central bank buying, while the sharp fall in the US dollar index to around 97.70 lent further support, Mer added.

"Although the technical charts indicate an overbought zone and may trigger some profit-booking, the trend remains positive with upside potential towards Rs 1,10,000-1,12,000 per 10 grams level on the MCX," he noted.

Mer further stated that political and geopolitical uncertainty in the global economy is keeping safe-haven demand for bullion firms. At the same time, expectations of strong festive demand in India are providing additional support to prices in the domestic market.

In overseas markets, Comex gold futures for December delivery surged over 1 per cent to settle at USD 3,653.30 per ounce after scaling a lifetime high of USD 3,655.50 per ounce.

Riya Singh, Research Analyst, Commodities and Currency, Emkay Global Financial Services, said the precious metal price advanced to an all-time high of USD 3,655.50 per ounce, propelled by a weaker US dollar and sliding Treasury yields after the August non-farm payrolls report showed the American economy added just 22,000 jobs, while the unemployment rate rose to 4.3 per cent from 4.2 per cent.

This soft labour data has strengthened the conviction of a rate cut by the US Fed, pricing in a near-full probability of monetary policy easing, thereby lowering opportunity costs for non-yielding assets, such as gold.

"The momentum will now hinge on forthcoming US inflation data, which could dictate whether gold consolidates or extends its rally beyond the current levels," Singh said.

According to Prathamesh Mallya, DVP - Research, Non-Agri Commodities and Currencies, Angel One, said, "Since the yellow metal price points are at their lifetime highs, the possibility of correction looks likely and those dips should be used as buying opportunities".

Jateen Trivedi, VP Research Analyst, Commodity and Currency, LKP Securities, said ongoing geopolitical strains and fragile trade relations of the US with major economies, including India, Russia and China, were reinforcing gold's role as a hedge against currency risks.

Analysts said festive demand in India, coupled with safe-haven buying amid political and economic uncertainty, is expected to keep bullion firmly supported in the near term.