Gold prices are likely to increase to Rs 72,500 per 10 grams in the near term.
On the MCX, gold was trading higher by 0.59 per cent at Rs 72,198 per 10 grams for the October 4, 2024, contracts. Silver was also trading up by around 0.95 per cent to Rs 86,022 per kilogram for the September 5, 2024, contracts.
Gold prices on Monday showed a strong rebound in the futures market, with the price of the precious metal crossing the Rs 72,000 mark on the Multi Commodities Exchange (MCX) on Monday afternoon. The sharp recovery came after US Federal Reserve Chairman Jerome Powell’s comment on the rate cuts, and amid rising geopolitical tensions following fresh strikes between Israel and Hezbollah in Lebanon.
On the MCX, gold was trading higher by 0.59 per cent at Rs 72,198 per 10 grams for the October 4, 2024, contracts. Silver was also trading up by around 0.95 per cent to Rs 86,022 per kilogram for the September 5, 2024, contracts.
“Gold and silver displayed strong performance last week following the Federal Reserve Chairman Jerome Powell’s indication of potential rate cuts during his speech at the annual Jackson Hole Symposium on Friday. Additionally, weaker US economic data and rising geopolitical tensions in the Middle East further supported the precious metals,” said Rahul Kalantri, vice-president (commodities), Mehta Equities Ltd.
US Fed’s Powell said the upside risks to inflation have diminished, while risks to the labour market have increased. Consequently, the time has come for a policy adjustment. While the direction is clear, the timing and pace of these rate cuts will depend on forthcoming economic data, he added.
On the geopolitical front, a fresh exchange of strikes between Israel and Lebonan’s Hezbollah has caused a rise in geopolitical uncertainties.
A cut in interest rates typically raises gold prices as it gives better returns during a low interest rate cycle. A spike in geopolitical tensions also raises gold prices.
In the international market also, gold and silver were trading higher. Gold was trading higher by 0.47 per cent at $2,525.2 an ounce, while silver was up by 0.91 per cent at $30.15 an ounce in New York.
“Gold continues to trade positive and is seen adding to last week’s gains, supported by rising rate cut bets by the US Fed that has pushed the dollar and treasury yields lower, and with additional support from safe-haven demand on signs of escalation in the middle-east tensions. Buying among central banks and ETF investors too is expected to continue in the near-term,” said Pranav Mer, vice-president, EBG- commodity & currency research, JM Financial Services.
Jateen Trivedi, vice-president and research analyst (commodity and currency) at LKP Securities, said, “Gold prices rose, with Comex gold up $12 at $2,525 and MCX gold increasing by Rs 400 to Rs 72,180. The rally follows Jerome Powell’s dovish speech, reinforcing expectations of interest rate cuts starting in September 2024. Markets are pricing in cuts of at least 0.75 bps by year-end.”
Trivedi, however, added that the precise magnitude, pace, and frequency of these rate cuts will depend on future economic data, particularly inflation, employment figures, and other key economic indicators. As a result, global markets are actively pricing in these potential cuts, and gold, being a non-yielding asset, stands to benefit from the lower interest rate environment.”
What’s Ahead?
Gold prices are likely to increase to Rs 72,500 per 10 grams in the near term, according to JM Financial Services’ Pranav Mer.
“On Charts… momentum remains positive with support at 71550/ 71300, while on the upside prices may test 72300/ 72500 (buying is advised at dips),” Mer added.
LKP’s Trivedi also said the gold price of Rs 71,500 will act as good support on any decline to enter gold, whereas Rs 72,500 will continue as resistance.
