Gold rates saw a slight increase in the early morning session across exchanges. Starting at ₹71,880 per 10 gm on the Multi Commodity Exchange (MCX), gold prices touched a high of ₹71,995 within minutes of the Opening Bell. Spot gold prices surged by approximately 0.50% to reach $2,516 per ounce, while COMEX gold prices rose by half a percent to hit $2,550 per troy ounce.
Market experts attribute the upward trend in gold prices today to the weakening US dollar and speculation surrounding a potential US Fed rate cut. However, investors are keeping a close watch on the US inflation data, with US initial jobless claims and GDP figures scheduled for release. This cautious approach could lead to gold prices trading within a range of ₹71,500 to ₹72,300, potentially setting the MCX gold rate on a path towards ₹73,500. Spot gold prices are anticipated to fluctuate between $2,480 and $2,530 per ounce.
Factors Influencing Gold Prices Today
Discussing the driving forces behind the current gold rates, Anuj Gupta, Head of Commodity & Currency at HDFC Securities, stated, “The rise in gold prices today is linked to expectations of an impending rate cut during the upcoming U.S. Fed meeting in September 2024. This expectation has contributed to a decline in US dollar rates, fueling the current rally in gold prices. The market’s attention is also focused on the forthcoming US initial jobless claim and GDP data, which will offer insights into US inflation metrics.”
Jateen Trivedi, VP Research Analyst — Commodity and Currency at LKP Securities, added, “Following Jerome Powell’s dovish speech, which reinforced expectations of interest rate cuts starting in September 2024, markets are factoring in potential cuts of at least 0.75 basis points by year-end. The specifics of these rate reductions will hinge on forthcoming economic data, such as inflation and employment figures. Consequently, global markets are adjusting to accommodate these anticipated cuts, with gold, as a non-yielding asset, standing to benefit from a lower interest rate environment. Key support is observed at ₹71,500, while resistance persists at ₹72,500.”
Focus on US Inflation
Market participants eagerly await the release of US initial jobless claims and GDP data scheduled for 1230 GMT. Additionally, the upcoming Personal Consumption Expenditures (PCE) data on Friday could offer further insights into rate projections.
Traders, as indicated by the CME FedWatch tool, have fully factored in a Fed easing in the next month. There is a 65.5% probability of a 25-basis-point cut and a 34.5% chance of a larger 50-bp reduction.
Atlanta Fed President Raphael Bostic mentioned on Wednesday that given the decrease in inflation and rise in unemployment, it may be appropriate to consider rate cuts, although caution is warranted.
Noting the historically low visible short positions, Daniel Ghali, commodity strategist at T.D. Securities, highlighted the prevailing bullish sentiment in the gold market. However, he emphasized the presence of risks due to positioning despite favorable fundamentals.
(With inputs from Reuters)
Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. It is advisable for investors to seek guidance from certified experts before making investment decisions, considering the dynamic nature of market conditions and individual circumstances.
Insight:
While market experts are optimistic about the rise in gold prices due to potential US Fed rate cuts, investors should remain cautious about the upcoming US economic data releases, as they could significantly impact future trends. The focus on US inflation and the market’s response to rate cut expectations will be crucial factors determining the trajectory of gold prices in the near term. Being mindful of support and resistance levels, along with broader economic indicators, will be essential for making informed investment decisions in the current market environment.
