Gold prices rose in India on Wednesday, according to data from India’s Multi Commodity Exchange (MCX).
Gold price stood at 62,408 Indian Rupees (INR) per 10 grams, up INR 103 compared with the INR 62,305 it cost on Tuesday.
As for futures contracts, Gold prices decreased to INR 62,446 per 10 gms from INR 62,574 per 10 gms.
Prices for Silver futures contracts decreased to INR 70,150 per kg from INR 70,594 per kg.
|Major Indian city
Global Market Movers: Comex Gold price fails to capitalize on a weaker US Dollar
- Investors continue to scale back their expectations for early and steep interest rate cuts by the Federal Reserve, which fails to assist the Comex Gold price to build on the previous day’s modest gains.
- The incoming stronger US macro data, influencing Friday’s blockbuster NFP report, suggested that the economy is in good shape, giving the Fed the headroom to keep rates higher for longer.
- Furthermore, the recent hawkish remarks by influential FOMC members, including Fed Chair Jerome Powell, squashed market expectations for more aggressive policy easing in 2024.
- Fed Chair Jerome Powell, in an interview with US TV show 60 Minutes aired on Sunday, reiterated that the March meeting is likely too soon to have confidence to start cutting interest rates.
- Philadelphia Fed President Patrick Harker said on Tuesday that inflation must be moving sustainably lower to open the door to rate cutsr and that it would be a mistake to cut interest rates prematurely.
- Harker added that the recent news on inflation has been encouraging, though wage gains are still too high for getting to the 2% target and it is possible that inflation may be more persistent than expected.
- Separately, Minneapolis Fed President Neel Kashkari said that we are not done yet on inflation and most of the disinflationary gains have come from the supply side, but the data is looking positive.
- The yield on the benchmark 10-year US government bond holds steady above the 4.0% mark, which favors the US Dollar bulls and should cap the XAU/USD, though geopolitical risks to lend support.
- The US continues its campaign against Houthi rebels in Yemen and intends to launch further strikes at Iran-backed groups, raising the risk of a further escalation of tensions in the Middle East.
- Traders now look to the US Trade Balance data and Fed speeches for short-term opportunities, though the focus remains glued to the release of the latest US consumer inflation figures next week.
(An automation tool was used in creating this post.)
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. 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 the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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