Gold prices continued with the weak trend of the prior week and closed in the negative territory with losses of around 0.47%. The precious metal witnessed swings during the week as prices recovered amid buying interest coming in at lower levels of around $1730 per ounce but gave up all the gains towards the close of the week. The key moving factor, which exerted pressure on gold was the upwards momentum in the dollar index which drew strength from better-than-expected economic data and hawkish comments by various Fed officials, stressing the need for further policy tightening by the US Fed, to bring inflation under control. 

The greenback initially surged towards two-decade highs to test the 109.27 mark, but as the momentum fizzled out slightly, gold capitalized on the same and witnessed renewed buying interest. Meanwhile, the US GDP contracted at a 0.6% annualized rate for the second quarter as per the second estimate, which was an upwards revision from the previously estimated 0.9% pace of decline. In another key data, as per the US Personal Consumption Expenditure Price Index, inflation in the US showed signs of easing amid softening energy prices, raising hopes that price pressures in the US might have peaked. US consumer prices rose by 6.3% from a year earlier in July as compared to a 6.8% annual increase in June.

Besides, the markets eagerly waited for further cues about the possibility of more aggressive rate hikes from Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium towards the close of the week. The market has been tossing up the possibility of a 50 or 75 bps rate hike at the Fed’s September meeting.

At the highly awaited event, the US central bank chief delivered a significantly hawkish speech and maintained that the policy stance is likely to remain restrictive for some time to restore price stability. This again drove investors into the safety of the dollar and dimmed the appeal of gold.

Gold price outlook

As for the outlook ahead, gold prices look to trade with a bearish bias and are vulnerable to some more selling pressure in the coming days with near-term resistance at the $1770 per ounce mark. Prices are likely to retest the downside levels of $1720 to $1710 per ounce again before resuming another leg of upside. At the domestic markets, prices are seen facing a hurdle at ?52,000 per 10gm in the immediate short term and unless that is breached, prices may correct and consolidate for a while. Nevertheless from a medium-term perspective, any declines toward ?50,700 to ?50,500 per 10 gm zone should be construed as a buying opportunity for higher targets of around Rs.53500 per 10gm. Eyes should be on the key support seen at ?48,800 per 10 gm mark.

Gold price triggers in near term

Going forward, the major highlight of the next week would be the US non-farm payroll and unemployment rate data, which would be keenly watched by the market participants to gauge the health of the US economy. Apart from that, inflation figures from Europe would provide some clues for next month’s ECB policy actions, while manufacturing data from the US, China, and Europe will be on investors’ radar later in the week. The dollar index movement would be quite crucial as the greenback took a breather after approaching two-decade highs of around the 109.29 mark but again regained strength while finding strong support at the 108 mark. As long as the dollar sustains above the same, it will remain a key headwind for gold prices. Indian GDP numbers and industrial output data during the week would also act as a key trigger for the rupee movement, which will further impact domestic gold prices.