The outcome of the 2024 Lok Sabha elections triggered a significant downturn in the Indian stock market, with the Nifty plummeting by 8.5% and the Sensex experiencing a nearly 6% decline. However, experts suggest a different scenario for gold.
“The outcome of central elections typically doesn’t have a direct influence on commodities prices as that is driven by global events, while the effects can be felt through the fluctuation of the local currency,” said Rahul Kalantri, VP commodities at Mehta Equities Ltd.
Kalantri further added, “Elections impact first appear in the currency market, consequently influencing the prices of commodities as a secondary outcome.”
On Wednesday, gold prices in New Delhi dipped by ₹80 to reach ₹72,820 per 10 grams following the downward trend globally, as reported by HDFC Securities. In the previous session, the precious metal had closed at ₹72,900 per 10 grams.
“Gold traded slightly weak today, hovering around ₹71,870 before the start of the evening session, within a minor range. The price is expected to be volatile this week with major data releases lined up, including nonfarm employment data today. Additionally, Nonfarm Payroll and Unemployment data are due later this week. The primary focus remains on the Fed’s policy decision on June 12th, but this week’s data will collectively inform the Fed’s decisions. In the near term, Gold prices are likely to range between ₹71,000 and ₹72,500, with profit booking expected on rises,” said Jateen Trivedi, VP Research Analyst – Commodity and Currency, LKP Securities.
Gold prices today
Globally, the price of the precious metal rose on Wednesday as bond yields declined following weaker-than-anticipated U.S. private payrolls data, strengthening the belief that the Federal Reserve might reduce interest rates later this year.
At 1449 GMT, spot gold climbed by 0.8% to $2,346.99 per ounce, rebounding from a 1% drop in the preceding session. U.S. gold futures also increased by 0.8% to $2,367.20.
Following data indicating a smaller-than-expected increase in U.S. private payrolls for May, benchmark U.S. Treasury yields dropped to their lowest level since April 5. Bob Haberkorn, senior market strategist at RJO Futures, noted that this weaker labor report adds weight to the speculation that the Fed might need to cut rates before the year’s end, consequently enhancing the attractiveness of gold. Lower interest rates diminish the opportunity cost associated with holding gold, which doesn’t yield interest.
“Gold volatility has fallen markedly in recent days as gold traders consider their next move, while many commodities are in a corrective decline. A full-fledged correction could bring the gold price back to $2000 or lower before it becomes interesting for long-term buyers again.
However, it cannot be ruled out that Gold will be able to withstand the sell-off in related assets and subsequently pull them back up, as it did in January. Such a turn of events would trigger a scenario of gold growth with the potential to take the price to the area of $2800. And it could be quite an aggressive fast rally rather than a smooth climb,” said Alex Kuptsikevich, the FxPro senior market analyst.
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Published: 05 Jun 2024, 10:31 PM IST
Insight:
– The impact of central elections on the stock market versus commodities.
– The influence of currency fluctuations on commodities prices.
– Factors affecting gold prices in the near term such as nonfarm employment data.
– Speculation about the Federal Reserve reducing interest rates and its impact on gold prices.
– Potential scenarios for gold price movements in the near future.
