On May 18, the latest reports indicated that recent measures by the Indian government to restrict gold imports have not curbed demand but instead triggered panic buying of wedding jewelry across the country. Meanwhile, Goldman Sachs precious metals analyst Lina Thomas reiterated that the year-end price target for gold remains unchanged at $5,400 per ounce. The situation stems from the sharp depreciation of the Indian rupee. As a major oil importer, India has been significantly impacted by disruptions in energy supplies from the Middle East, leading to substantial foreign exchange outflows and pushing the rupee to a record low. The Reserve Bank of India was forced to intervene by selling dollars to support the currency. To further stabilize the exchange rate, the Modi government initially urged the public to reduce gold purchases and overseas travel, then significantly raised gold import tariffs, and days later directly limited gold import volumes, warning that more emergency measures were under consideration to protect foreign exchange reserves.
In other developments, Japanese Prime Minister Takaichi Sanae is preparing to announce the compilation of a supplementary budget to address the impact of sustained high commodity prices due to the ongoing conflict in the Middle East. This move not only marks a significant shift in government policy but also heightens market concerns about Japan's fiscal sustainability, especially as long-term government bond yields have already climbed to multi-decade highs. On May 18, Bloomberg reported, citing informed sources, that the focus of this supplementary budget is to fund emergency relief measures rather than stimulate the economy. Reuters reported on Monday, citing a government official, that the government may finance part of the additional budget by issuing new bonds. This contrasts sharply with recent public statements by Prime Minister Takaichi and Finance Minister Kamikawa Yōko, who had denied the necessity of a supplementary budget for weeks.
There are few key data points to watch today, with only the U.S. NAHB Housing Market Index for May requiring attention.
Gold/USD Gold fell sharply last Friday, narrowly holding above the 4500 level and hitting a fresh 9-day low. It is currently trading around 4540. Strong U.S. economic data released during the period, which fueled expectations of Federal Reserve rate hikes, was the primary factor weighing on gold. Additionally, heightened market risk aversion and rising U.S. Treasury yields also contributed to the decline. Today, focus will be on resistance near 4600, with support around 4500.
AUD/USD The Australian dollar declined last Friday, hitting a fresh 8-day low, and is currently trading around 0.7130. Apart from continued profit-taking pressure, the U.S. dollar index's sustained climb, supported by factors such as strong economic data reigniting Fed rate hike expectations, also weighed on the AUD. Furthermore, persistent market risk aversion continued to pressure the currency. Today, watch for resistance near 0.7200, with support around 0.7050.
USD/CAD The USD/CAD pair rose last Friday, reaching a fresh 4-week high, and is currently trading around 1.3750. The primary driver was the sustained appreciation of the U.S. dollar index, bolstered by multiple factors including heightened Fed rate hike expectations and safe-haven demand. Additionally, weaker-than-expected Canadian economic data released during the period provided some support for the pair. However, rising crude oil prices limited further upside. Today, focus will be on resistance near 1.3850, with support around 1.3650.