Commodity Radar: Gold plunges Rs 3,000/10 gram as investors turn cautious ahead of Fed policy. Should you sell on rise?

The ongoing Iran-Israel war has failed to lift the mood around bullion as gold prices extended their losing streak on Monday. The April yellow metal futures fell by Rs 3,000 per 10 gram (2%) to the day's low of Rs 1,55,434 on the MCX, taking cues from profit booking in overseas markets.

Gold price was hovering around $4,997.40 an ounce on the COMEX around 2 pm India time, falling by $64.30 or 1.3% over the Friday closing price.

Traders remained cautious ahead of the US Federal Reserve policy meeting that starts tomorrow. The two-day meeting will end with a press conference by Chair Jerome Powell, and global markets will be tracking the commentary by the world's largest central bank amid the ongoing war where the US is a partner to Israel.

The Fed is expected to hold rates as inflation fears do the rounds in light of spiralling energy prices as the Strait of Hormuz remains shut for Israel, the US and their allies. Brent has already shot up by 40% this year and is currently trading around the $106 per barrel mark.

Even a falling rupee has failed to lift sentiment for domestic investors. The rupee's weakness against the US dollar supports domestic prices as import costs remain impacted. The local currency is trading around its lifetime low of 92.47.

Jateen Trivedi, Vice President and Research Analyst at LKP Securities, said geopolitical tensions in the Middle East continue to inject volatility into bullion markets, while rising inflation concerns may keep interest rates elevated, limiting strong upside momentum in gold.

Commenting on the rupee factor, Trivedi said domestic gold prices remain more volatile than COMEX due to INR fluctuations. In his view, rupee movement can amplify corrections or limit upside momentum in MCX gold.

"Gold has entered a sideways corrective phase after the earlier rally, with price now consolidating around the Rs 1,56,000 to Rs 1,57,000 zone. The broader structure indicates weakening momentum while geopolitical developments between the US-Israel and Iran continue to keep volatility elevated in bullion markets. Geopolitical tension often pushes investors toward safe-haven assets like gold, though inflation and interest rate expectations can limit rallies," the analyst said.

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4 factors to consider before trading

1) Key support and resistance levels

Price action shows a range-bound structure after the spike, with lower highs forming near resistance. The immediate resistance is seen at Rs 1,58,000 while major resistance is at Rs 1,61,000.

Trivedi sees immediate support at Rs 1,55,500 while strong support is at Rs 1,54,000. Failure to sustain above Rs 1,58,000 keeps the short-term bias on the downside, he added.

2) Momentum indicators

RSI is around 47, indicating weakening momentum and a shift toward neutral-to-bearish territory. Momentum indicators such as RSI help traders identify trend strength and overbought or oversold conditions in commodities like gold. Price is trading near the middle band, suggesting consolidation with a mild downward bias. If price moves toward the lower band near Rs 1,54,000, it could signal continuation of the corrective phase.

3) Moving averages

EMA 8 (Red): Flattening and acting as short-term resistance.
EMA 21 (Yellow): Holding near Rs 1,56,000 but losing upward slope.

Price trading around these averages indicates trend exhaustion and consolidation.

4) MACD

MACD momentum is fading, indicating that the bullish momentum from the earlier rally is cooling. MACD is commonly used by traders to identify changes in trend momentum by comparing short and long-term moving averages.

Gold trading strategy

The LKP analyst recommends a 'sell on rise' strategy around Rs 1,58,000 with a stop loss of Rs 1,61,000 and target of Rs 1,54,000.

Gold appears to be entering a short-term corrective phase, and rallies towards the Rs 1,58,000 resistance zone may attract selling pressure while the price remains below Rs 1,61,000.

(Disclaimer: The recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times.)