Gold price outlook: Analyst suggests buying on dips; key levels to watch

Business Standard

05-06-2025

Gold: Consolidating its gains
Performance:
Following a sharp rally of 2.33 per cent on Monday, Spot gold prices corrected lower on Tuesday as the US dollar recovered.
Gold surged sharply higher on June 2, helped by a weaker dollar and renewed safe-haven demand triggered by escalating US-China tensions and Ukraine's massive drone attack on Russia.
On June 3, gold, at the time of writing this report, was changing hands at $3,349, down around 1 per cent on the day, while MCX August gold at ₹97,649 was down roughly 0.31 per cent. The yellow metal was lower as the US dollar index strengthened and risk appetite, despite mostly negative news flow, remained healthy.
US-China tensions escalate:
On June 2, China accused the US of violating the US-China trade truce as the US imposed further chip technology curbs and halted the export of critical US jet engine parts and technology to China. It also plans to broaden restrictions on China's tech sector with new regulations to capture subsidiaries of companies under US curbs. The US also intends to revoke visas for Chinese students with connections to China's Communist Party and security issues.
According to the White House, US President Trump and Chinese President Xi are likely to speak this week.
Data roundup:
US data released on June 3, were mostly mixed, markets gave more weightage to the JOLTs job openings though.
Factory order (April) came in -3.7 per cent against the forecast of -3.2 per cent as the prior data was revised lower from 4.3 per cent to 3.4 per cent. Durable goods order (April final) at -6.3 per cent were in line with the forecast.
JOLTs job openings (April) surprisingly beat the forecast as openings rose from 72,00,000 to 73,91,000 as against the forecast of 71,00,000. However, the internals of the JOLTs report was not so encouraging as layoffs increased from 1 per cent to 1.1 per cent and the quits rate dropped from 2.1 per cent to 2 per cent indicating reduced prospects of finding a new job. In addition, vacancies in industries like manufacturing and food services declined.
The Euro-zone's inflation cooled more than expected as consumer prices rose 1.9 per cent y-o-y in May, trailing the forecast of 2 per cent; the reading was cooler than the prior data of 2.2 per cent.
The data bolsters the case for the ECB cutting its key rates by 25 bps in its monetary policy meeting to be held on June 5. Elsewhere, China's Caixin manufacturing PMI (May) fell to 48.3, the lowest since September 2022, from 50.40 in April as trade frictions weighed on the nation's manufacturing sector. CATCH STOCK MARKET LIVE UPDATES TODAY
US dollar index and yields:
The US dollar index, at the time of writing, was 99.24, up around 0.60 per cent on the day, as the Index recovered from a six-week low ahead of the US ISM services and nonfarm payroll reports. US 10-year yields at 4.46 per cent were up by nearly 0.50 per cent
OECD's warning:
The OECD slashed its global economic forecasts on trade war leading to uncertainty on business confidence and investment.
The organisation sees global economic growth at 2.9 per cent in 2025 from its earlier forecast of 3.1 per cent made in March as the US growth is expected to be 1.6 per cent as compared to its earlier estimate of 2.2 per cent. The OECD forecasts a global growth of 2.9 per cent in 2026, down from the previous forecast of 3 per cent.
The organisation warned that fiscal risks are intensifying around the world with tremendous pressure for spending on defence, climate, and aging population.
ETF:
Total known global gold ETF holdings rose to 88.336MOz on June 2, which is the highest level since May 15. Gold ETFs recorded their first weekly inflow last week after five consecutive weekly outflows. Holdings are up nearly 6.6 per cent year-to-date (Y-T-D).
Central Banks' gold buying:
Global central banks bought a net 12 tons in April, 12 per cent lower than the previous month. Slower pace of buying could be due to high gold prices in April.
Upcoming data:
Today's US data on the card include crucial ADP employment change (May) and ISM services (May). Fed will release its beige book, too.
Outlook:
Spot gold is likely to range trade ahead of the US ISM services and nonfarm payroll reports. US-China tensions and worries over fiscal issues are likely to support the metal. It is advisable to 'buy the dips' for a possible test of $3,435 (₹1,00,000) resistance unless there is a clear improvement in US-China talks or the US nonfarm payroll report is stronger than expected.
Support is at $3,325 (₹96,900)/$3,292 (₹95,900). Resistance is at $3,372 (₹98,300)/$3400 (₹99,100)/$3,415 (₹99,500).