“Gold’s attractiveness depends on US Fed’s actions”
According to an economist, gold became appealing due to the US dollar’s deterioration and the possibility that the US Federal Reserve would postpone raising interest rates.
Markets now predict that rates will stay the same at the US Federal Reserve meeting in June by a margin of 77.2%. Bond rates and the dollar index both declined from their recent highs. The dollar index fell by 0.73 percent and finished the previous session at 103.56 level. According to Saumil Gandhi, Senior Analyst, Commodities, HDFC Securities Ltd., “Weakness in the US dollar and expectation of a pause in the US Federal Reserve policy tightening campaign boosted precious metals’ appeal.”
According to him, Comex immediate gold prices rose on Friday, with the immediate price of the metal trading 0.6% higher at $1978.80 per ounce. In contrast, around midday, the MCX Gold August futures contract was trading 0.5% higher at Rs 60,250 for 10 grammes.
“Gold prices rose on Friday during Asian trading hours. After dovish remarks by Philadelphia Federal Reserve President Patrick Harker, who suggested that US central bankers should not increase interest rates at their next meeting despite rising inflation is coming down at a “disappointingly slow” pace, yellow metal gained as emotions improved, Gandhi added.
Comex spot gold is projected to find buyers between $1965 and $1950 per ounce, with $1995 and $2009 per ounce serving as the day’s resistance. According to him, the support and resistance levels for the MCX Gold August future are expected to be Rs. 60,080/59,700 per 10 grammes and Rs. 60,580/60,750 per 10 grammes.
The US Federal Reserve may decide to raise rates in June as a result of regional US banks displaying signs of stability, persistently high inflation, and the success of the debt deal, according to Quantum AMC in a report written by Chirag Mehta, CIO, and Ghazal Jain, Fund Manager. This move would be detrimental to gold in the near term.
If the US Fed does take a break in June, Quantum AMC predicts that whether the break is brief or protracted will depend on whether prices continue to decline steadily. Gold prices would benefit from a delay.
The Fed has limited room to raise rates in the medium term due to the economy. Markets continue to anticipate a rate decrease from the Federal Reserve later this year. According to the Quantum AMC study, a rate decrease would be preceded by worsening economic circumstances or financial instability, which strengthens the investment rationale for keeping portfolio diversifiers like gold.
According to the research, investors may take advantage of the present market consolidation to stock up on gold and increase their long-term allocation.
