Gold Prices Hit Six-Month Peak Amid Dollar Decline, Speculation Of Fed Rate Cut
In a significant market development, gold prices soared to a six-month high on Wednesday, propelled by a weakening US dollar and growing expectations of an impending reduction in the key policy rates by the US Federal Reserve. Spot gold saw a notable surge, trading at USD 2,041.55 per ounce, reflecting a 1.4 per cent increase and achieving its highest level since 10 May.
Simultaneously, US Gold futures mirrored the uptrend, climbing by 1.4 per cent to reach USD 2,040. The broader precious metals market displayed mixed reactions, with silver prices increasing by 1.4 per cent to USD 24.97 per ounce, platinum concluding with a robust 2.3 per cent rise at USD 939.80, while palladium experienced a 1.4 per cent dip to USD 1,055.59 per ounce.
The surge in gold prices on Wednesday follows a nearly one per cent increase on Tuesday on the New York Commodity Exchange, where gold reached USD 2,028 per ounce. This upward trajectory coincided with a decrease in US government bond yields and a weakening dollar against several major currencies.
In the Indian market, gold prices reached unprecedented levels, with 22-carat gold trading at an all-time high of Rs 5,810 per gram, and 24-carat gold commanding a price of Rs 6,338 per gram. Morning prices on 29 November, as reported by GoodReturns, stood at Rs 58,100 for 10 grams of 22-carat gold and Rs 63,380 for the same quantity of 24-carat gold. Additionally, silver was reported at Rs 78,500 per kilogram.
Mahendra Luniya, Digital Gold Expert, Chairman, Vighnaharta Gold said, "In June, gold prices fluctuated between 60,000 and 61,000, impacted by reduced faith in the US government's debt repayment and increased yields on US bonds, causing a drop to 56,000. In October, gold briefly surpassed USD 1,900 but dipped to USD 1,800 - USD 1,700. An attack on Israel by Hamas spiked gold prices to $2,000 amid global uncertainty. Ongoing tensions have sustained gold around USD 2,000, driven by investors seeking stability.”
He further mentioned that despite past stabilisations, the Israel-Hamas conflict and global unrest hint at a gold price surge, potentially exceeding USD 2,100. “The looming threat suggests a rise to 64,000 per tola in the Indian market by March. Investing in gold for a year or two appears lucrative amid geopolitical uncertainties. The situation underscores how gold serves as a safe-haven asset during crises, and its trajectory hinges on geopolitical developments. While current indications lean towards a continued rise, the complex interplay of global events makes future projections uncertain, urging investors to monitor the situation closely for informed decisions.”
City-wise, in Mumbai, Kolkata, Kerala, Bangalore, and Hyderabad, the price of 10 grams of 22-carat gold was consistent at Rs 58,100, while 24-carat gold was priced at Rs 63,380. In Delhi, 10 grams of 22-carat gold was listed at Rs 58,250, and in Chennai, it was Rs 57,700. Correspondingly, the cost of 10 grams of 24-carat gold in Delhi was Rs 63,530, while in Chennai, it stood at Rs 64,040.
Investors and analysts are closely monitoring these market dynamics, considering the interplay of global economic factors and the potential impact on the precious metals sector. Anuj Arora, Co-founder & COO, SahiBandhu said, “Gold attained a six-month pinnacle, reaching USD 2,028 per ounce. Gold prices in India on Wednesday were recorded at Rs 5,810 per gram for 22 carats, and for 24 carats, the price stood at Rs 6,338 per gram. The surge in global gold prices, reaching a 6-month high and nearing record levels in India, is attributed to the decline in US government bond yields, the depreciation of the dollar and the metal's resilient allure as a safe-haven asset amid economic uncertainties. In India, a confluence of factors, including festive demand and a weaker rupee, intensifies the upward trajectory. Certain analysts are anticipating unprecedented peaks for the precious metal in the year 2023.”
Veer Mishra, Founder of Plus too commented on this, and said, “Gold prices have been rising over the past six months, almost to record highs in India due to a combination of local and international causes. Domestic gold prices have significantly increased as a result of the depreciation of the Indian rupee relative to the US dollar, which has increased the cost of gold imports. In addition, the impending Indian holidays, such as Diwali and Dhanteras, usually result in a spike in the demand for gold, which supports the upward price trend. In addition, investors are turning to gold, which is often regarded as a hedge against inflation, as a result of mounting fears about inflation in India.”
Mishra further added, “The prolonged conflict in Ukraine and growing interest rates have contributed to a worldwide state of economic unpredictability that has increased demand for gold as a safe haven asset. Gold's attraction has been enhanced by the depreciation of the US dollar, which has drawn in investors holding other currencies. It is anticipated that the combination of these local and international forces would maintain gold prices at high levels in the foreseeable future. Based on their investment horizon and risk tolerance, investors should keep a careful eye on market trends and make well-informed selections.”
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