By Gold prices edged higher during the early morning session across bourses today, continuing their upward trend as investors reacted to weakening US dollar prices and ongoing speculation about potential interest rate cuts by the US Federal Reserve.
On the MCX, gold rates opened at ₹71,880 per 10 grams and quickly touched an intraday high of ₹71,995, reflecting strong bullish sentiment in the market. Similarly, spot gold prices surged by around 0.50%, reaching $2,516 per ounce, while COMEX gold prices also rose by half a percent, hitting $2,550 per troy ounce.
The upward movement in gold prices is being driven largely by expectations of a dovish turn from the US Federal Reserve. Market sentiment has been influenced by recent comments from Fed officials, including Atlanta Fed President Raphael Bostic, who hinted that with inflation easing and unemployment rising, it might soon be time to consider rate cuts.
This has put pressure on the US dollar, as lower interest rates typically weaken the currency, making gold, a non-yielding asset, more attractive to investors.
Commodity market experts are closely watching the developments, noting that the current uptrend in gold prices could continue if the US dollar remains under pressure.
They also caution that investors should remain vigilant as key US economic data is expected to be released today, including initial jobless claims and GDP figures. These data points are crucial as they will provide further insights into the state of the US economy and could influence the Federal Reserve’s decisions on interest rates.
Anuj Gupta, Head of Commodity & Currency at HDFC Securities, pointed out that the market is currently pricing in a rate cut at the upcoming US Federal Reserve meeting in September 2024. This expectation has led to increased buying interest in gold, as a lower interest rate environment typically supports higher gold prices. However, Gupta also emphasized the importance of the upcoming US economic data, which will likely impact market sentiment in the short term.
He noted that gold prices on the MCX are expected to trade in a range-bound manner, with support at ₹71,500 and resistance at ₹72,300. If the price breaks through the ₹72,300 level, Gupta believes the MCX gold rate could quickly rise to ₹73,500.
Jateen Trivedi, VP Research Analyst — Commodity and Currency at LKP Securities, echoed similar sentiments, highlighting the impact of Federal Reserve Chair Jerome Powell’s recent dovish speech. Powell’s remarks have reinforced market expectations of interest rate cuts starting in September 2024, with many investors now pricing in cuts of at least 0.75 basis points by the end of the year.
Trivedi suggested that the precise magnitude and timing of these rate cuts will depend on upcoming economic data, particularly inflation figures and employment statistics. He also identified ₹71,500 as a strong support level for gold prices, with ₹72,500 acting as a key resistance level in the near term.
As market participants await the release of the US initial jobless claims and GDP data, there is a sense of cautious optimism among gold investors. These data points, along with the Personal Consumption Expenditures (PCE) data due on Friday, will offer further clues on the outlook for US interest rates and inflation.
According to the CME FedWatch tool, traders have already priced in a Fed easing next month, with a 65.5% chance of a 25-basis-point cut and about a 34.5% chance of a larger 50-basis-point reduction.
This has led to a bullish narrative in gold markets, although some analysts warn that visible short positions remain near decade-lows, indicating potential risks to the near-term outlook.
As the day progresses, all eyes will be on the US economic data and its implications for the gold market. With the potential for significant market movements based on these releases, investors are advised to stay informed and ready to adjust their positions accordingly.
For now, gold prices continue to benefit from the current macroeconomic environment, with further gains likely if the Federal Reserve moves towards a more accommodative monetary policy stance.
