Gold price today: Rates rise after Fitch Ratings downgrades US credit rating; what should investors do?
3 min read 02 Aug 2023, 10:31 AM ISTGold price today: Gold rates rose after Fitch Ratings downgraded the US credit rating, which weighed on the US dollar, boosting safe-haven gold. Experts believe gold prices may trade higher today, taking support from the dollar's weakness after the Fitch downgrade.
PremiumGold prices moved higher in the morning session in the domestic futures market on Wednesday, tracking positive global cues after Fitch Ratings downgraded the US credit rating, denting confidence in the US economy and boosting safe-haven gold.
In the previous session, gold prices dropped about a per cent in international markets to hit a three-week low as the dollar firmed after healthy US manufacturing and construction data for June.
But gold prices saw decent gains today after Fitch Ratings downgraded the long-term foreign-currency issuer default rating (IDR) of the US to an 'AA+' from an 'AAA' with a 'stable' outlook, citing fiscal deterioration over the next few years and growing general government debt burden.
The move has the potential to affect the overall economy and hit investor confidence, leading to negative market sentiment. Moreover, the downgrade can also impact the US dollar in a negative way which is positive for gold since the yellow metal is priced in dollars. Investors prefer gold for investment in times of economic uncertainty.
Read more: Fitch Ratings downgrade: Could a cut in US rating mean higher inflows to India, other EMs?
MCX Gold for October delivery traded 0.26 per cent higher at ₹59,544 per 10 grams around 10:10 am.
What should be your strategy for gold today?
Gold prices may trade with gains today, taking support from the dollar's weakness after the Fitch downgrade.
Ravindra V. Rao, CMT, EPAT, VP-Head Commodity Research at Kotak Securities believes gold prices might stay buoyed for the day as Fitch Ratings’ move to strip the US of its top-tier sovereign credit grade might keep demand for safe havens buoyed.
Brokerage firm Motilal Oswal Financial Services believes gold, on MCX, could trade in the range of ₹58,800–59,700.
"MCX Gold is likely to trade within a range for the session. Support is placed at ₹59,380-59,200 and resistance is at ₹59,720-59,880," said the brokerage firm.
Manoj Kumar Jain of Prithvifinmart Commodity Research expects gold and silver prices to remain volatile this week ahead of the US job data.
"Gold could hold its support level of $1,974 per troy ounce while silver could also hold its support level of $24.20 per troy ounce in the international markets. Gold has support at $1,974-1,958, while resistance at $1,988-2,000 per troy ounce. Silver has support at $24.20-23.84, while resistance is at $24.55-24.84 per troy ounce," said Jain.
"On MCX, gold is having support at ₹59,200-58,950 and resistance at ₹59,550-59,770 while silver is having support at ₹73,550-73,100 and resistance at ₹74,400-74,850. We suggest buying gold for around ₹59,300 with a stop loss of ₹59,080 for the target of 59700," said Jain.
Deveya Gaglani, a research analyst for commodities at Axis Securities pointed out that gold prices snapped their winning streak in the last session. On the daily chart, prices formed a large red candle and closed below the previous session low of around ₹59,411 level. It was down by more than one per cent. The strength in the dollar index was the main reason behind the precious metals sell-off.
"It is comfortably placed above the $102.10 level. The dollar index and gold prices are inversely correlated with each other. Traders and investors are eagerly awaiting non-farm payroll data this week, which may influence the Fed rate hike decision. On the daily chart, a strong support zone is placed around the ₹59,300 level, and the resistance is around the ₹59,800 level," said Gaglani.
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