Gold at record high of $1048, weak dollar to support

Spot Gold prices touched a record high of $1,048/oz on Wednesday on concern over potential inflation as central banks struggle to emerge from unprecedented fiscal stimulus measures.

Gold prices may stand to gain further as the dollar’s dominance fades with the emergence of a multipolar world. Though no other currency can replace the dollar so soon, the need for an alternative is clear and growing. That in itself is a threat to the dollar, which was always considered the global reserve currency.

Gold prices could benefit the most if the weakness in the dollar continues as it has a currency aspect without being tied to any country. This has increased the value of gold as an asset. Since March this year, the dollar has declined around 14% and a major part of the gold’s gain gave been backed by the falling dollar.

In the currency market, The Euro ended on a weak note yesterday as traders remained cautious ahead of the ECB decision which is expected to be out today. Europe’s economy contracted more than estimated in the second quarter as consumer spending, investment and exports came in weaker than reported earlier.

For the day, support is seen at 1.4640/1.4600 whereas resistance is seen at 1.4745/1.4785. The Indian Rupee hit its highest level in more than a year on Wednesday as it touched 46.47. Gains in the Rupee were backed by inflows in the domestic equities coupled with dollar sales by banks. For the day, support is seen at 46.30/46.25 whereas resistance is seen at 46.45/47.60.

The rally in gold prices is mainly supported by a weaker dollar. If the weakness in the dollar continues then gold prices could continue to receive upside support. The trend in the dollar index remains down and that gives indication that gold prices could edge higher. However, profit-booking at higher levels cannot be ignored.

On intraday basis, Spot Gold prices have immediate support at $1036/$1029 whereas resistance is seen at $1049/$1055. Spot Silver prices shall find support at $17.32/$17.10 whereas resistance is seen at $17.85/$17.95.

MCX October Gold has support at 15745/15680 whereas resistance is seen at 15885/15960. MCX Dec Silver shall find support at 26920/26740 whereas resistance is seen at 27400/27510 levels.

Courtesy: Angel Commodities

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