Gold prices rose in India on Tuesday, according to data from India’s Multi Commodity Exchange (MCX).
Gold was priced at INR 61,088 per 10 grams, up by INR 304 from INR 60,784 on Monday.
In terms of futures contracts, gold prices rose to INR 60,956 per 10 gz from INR 60,657 per 10 gm.
Prices for silver futures fell to INR 72,788 per kg from INR 72,644 per kg.
|Big Indian city||The price of gold|
|New Dilli||63 180|
Global market drivers: Comex gold price jumps on dovish Fed expectations
- The sell-off in US dollars remains unabated amid dovish Federal Reserve expectations and helped the Comex gold price regain strong upside on Tuesday.
- Investors are now confident that the Fed has completed its rate hike cycle and are looking for clues as to when the central bank might start easing its monetary policy.
- The rate-sensitive 2-year U.S. government bond yield remains below the Fed’s current funds target of 5.25% to 5.50%, suggesting momentum in favor of a rate cut is building.
- CME’s Fedwatch tool points to a roughly 30% chance the Fed will start cutting rates as early as March 2024, and a cumulative easing of nearly 100 bps through the end of the year.
- The benchmark US 10-year Treasury yield fell to a fresh two-month low and undercut the USD, offsetting upbeat market sentiment and benefiting from the unyielding yellow metal.
- Investors grew upbeat after Chinese officials promised to introduce more policy support for the country’s beleaguered real estate sector and foster stronger growth momentum.
- China’s new finance minister, Lan Fo’an, said the country would increase budget spending to support a post-pandemic recovery in the world’s second-largest economy.
- Fed officials, meanwhile, did not rule out the possibility that another rate hike might be needed if a change in economic data warranted it.
- Richmond Fed President Thomas Barkin said on Monday that inflation is likely to remain stubborn and force the central bank to keep rates higher for longer than investors currently expect.
- This, in turn, could act as a headwind for the precious metal as traders look to the FOMC minutes for fresh cues on future Fed policy and some meaningful momentum.
Frequently Asked Questions About Gold
Gold has played a key role in human history as it has been widely used as a store of value and a medium of exchange. Nowadays, the precious metal, apart from its luster and use for jewelry, is widely seen as a safe haven, meaning it is considered a good investment in turbulent times. Gold is also widely seen as a hedge against inflation and currency depreciation because it does not rely on any particular issuer or government.
Central banks are the largest holders of gold. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy gold to improve the perceived strength of the economy and currency. High gold reserves can be a source of confidence for a country’s solvency. Central banks added 1,136 tons of gold to their reserves in 2022, worth about $70 billion, according to data from the World Gold Council. This is the highest annual purchase since records began. Central banks from emerging economies such as China, India and Turkey are rapidly increasing their gold reserves.
Gold has an inverse correlation with the US dollar and US Treasuries, which are both major reserves and safe-haven assets. When the dollar weakens, gold tends to rise, allowing investors and central banks to diversify their assets during turbulent times. Gold is also inversely correlated with risk assets. Stock market rallies tend to weaken the price of gold, while sell-offs in riskier markets tend to favor the precious metal.
The price can fluctuate due to a wide variety of factors. Geopolitical instability or fears of a deep recession can quickly escalate the price of gold due to its safe-haven status. As a lower-yielding asset, gold tends to rise with lower interest rates, while the higher cost of money typically weighs on the yellow metal. Still, most moves depend on how the US dollar (USD) behaves when the asset is priced in dollars (XAU/USD). A strong dollar tends to keep the price of gold in check, while a weaker dollar is likely to push gold prices up.