Further rise in gold prices will depend on geopolitical unrest

Gold opened on the Multi Commodity Exchange (MCX) on Thursday at Rs 60,890 per 10 grams and hit an intraday low of Rs 60,831. In the international market, prices hovered around $1,984.51 per troy ounce. Meanwhile, silver opened at Rs 71,820 per kg, hit an intraday low of Rs 71,690 on the MCX, and hovered around $22.99 per troy ounce in the international market. 

Anuj Gupta, Head of Commodity and Currency at HDFC Securities, said, “Gold prices yesterday closed on a negative note, down by 0.25% at  60785 levels due to profit booking before the FOMC meeting. However, FOMC keeps interest rates stable, which will be positive for the billions on inflation concerns. The dollar index is trading below 106 levels at 105.96 levels. Some cool-off is witnessed in the dollar index and YS bond yields. For trading, gold may trade between $1980 to $1995 levels and on MCX, it may trade between 60400 to 61300 levels. Silver may trade between 71000 to 72500 levels.” 

Praveen Singh, Associate VP, Fundamental Currencies and Commodities, Sharekhan by BNP Paribas, said, “Yesterday, spot gold closed steady at $1983. As expected, the US Federal Reserve kept its benchmark rate unchanged at 5.25% to 5.50% as Fed Chair Powell cited tighter financial conditions and high yields can serve as rate hikes. He said that they are not looking at rate cuts, and the rate of quantitative tightening will remain unchanged. He added that inflation remains elevated. Gold will find it hard to rise significantly unless geopolitical tensions escalate further.” 

Along with the Fed policy meeting, the market focus is also on geo-political tensions, continuously building the risk premium in bullions. On data front, Manufacturing PMI data from major economies were reported weaker than expectations. In contrast, the US private payroll data was higher than the previous month but still was lower than the estimates supporting an up-move in bullions. 

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Manav Modi, Analyst, Commodity and Currency, MOFSL, said, “Investors are now looking ahead to Friday’s jobs report and ISM services report. If these numbers present a softer economic scenario, it could further boost gains for gold and silver prices. Gold held firm after the U.S. central bank announced its widely expected decision to leave interest rates unchanged, and Chair Jerome Powell said the question of rate cuts is not on their radar right now,” said Modi. 

The US Fed kept rates on hold, leaving the door open for more policy tightening. Comments from US Fed Chairman Jerome Powell presented a mixed outlook. Powell said in a post-meeting briefing that the Fed still had a long way to go before inflation reached its 2% target. He also noted that financial conditions had tightened substantially this year, citing more economic risks. 

Colin Shah, MD, Kama Jewelry, said, “The US Fed has kept the rate unchanged for the second time and is on the much-expected lines in reflection of the uncertainty in the global economy. This move indicates the efforts of the Fed body to keep inflation in control with sustained yet steady momentum towards the goal of bringing down the inflation rate within the range of 2%. Having said that, another rate hike is probable during this financial year. This may result in fluctuations at an international level. However, due to the festive gold buying in India, the mild turbulence will be well absorbed on the domestic front.”