Range-bound Trading Expected In The Coming Weeks

"Risk aversion may develop as a result of the prolonged uncertainty surrounding the RussiaUkraine conflict, in which Russia has threatened to use nuclear weapons to occupy portions of Ukraine. Flows may be diverted to assets with lower risk levels, like gold."

Despite renewed supply shortage issues, ongoing inflation concerns and the Federal Reserve’s pledge to control inflation alongside recession fears, the prices of commodities remained volatile. Recent remarks by Federal Reserve officials make it quite evident that the instability of the financial markets did not deter them from raising interest rates further. In Asia, oil prices remained stable as the US dollar declined, but gains were constrained by increased shale production and worries that persistently high inflation would push the global economy into recession.

The removal of a large portion of the government’s so-called ‘mini-budget’ by Britain’s new finance minister, Jeremy Hunt, increased the risk appetite and caused the dollar to decline against a basket of major currencies. Risk aversion may develop as a result of the prolonged uncertainty surrounding the Russia-Ukraine conflict, in which Russia has threatened to use nuclear weapons to occupy portions of Ukraine. Flows may be diverted to assets with lower risk levels, like gold. The disruptions brought on by the war may cause inflationary pressures to increase further, which could lead to stagflation pressures.

In the past, stagflation-like conditions have been favourable for gold prices. According to the Energy Information Administration, oil production in the largest US shale oil basin,the Permian Basin of Texas and New Mexico, is expected to increase by around 50,000 barrels per day (bpd) this month to a record 5.453 million bpd. Oil prices have also been supported by expectations that China will maintain its lax monetary policy to aid its economy, which has been hindered by the pandemic.

The nation’s central bank extended medium-term policy loans that were about to mature while leaving its benchmark interest rate steady for a second month. In the meantime, OPEC+ members have been lining up to accept the drastic reduction in output objective decided this month after the White House accused Riyadh of pressurising certain other countries into backing the decision. As the dollar lost some gain following the UK’s decision to cancel almost all of its proposed tax cuts, risk appetite increased in the market, Comex Gold stabilised around USD 1,650 an ounce, halting a recent decline.

The US Federal Reserve is expected to tighten more in order to reduce inflation, which has continued to put pressure on the price of metal. Recent data revealed that US year-ahead inflation expectations rose, supporting the argument for more rate increases combined with a hot inflation report from September. Silver has a support range of ₹55,800-55,200 and a resistance range of ₹56,660-57,200 on the MCX, while gold has a support range of ₹50,220-50,050 and a resistance range of ₹50,700-50,880.