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Gold prices rose to a new high, soaring to $65,298 per 10 grams on the MCX, indicating a notable increase of more than $2,700 in the first week of March last week on Thursday. This notable upward trend in the value of the precious metal is mainly attributed to the forecast of an interest rate cut by the US Federal Reserve in June.
This expectation has ignited bullish sentiments in domestic and international markets, further fueling the rise in gold prices.
Chairman Jerome Powell’s indication of a possible Central Bank rate cut in the coming months boosted market sentiment, sending gold to a new high of $2,152 in international markets on Wednesday.
Also Read: Gold and Silver Prices Today 08-03-2024: Check Latest Rates in Your City
International gold prices ended February down 0.25% at $2,032.8 per ounce, while domestic prices closed down 0.67%.
On the other hand, MCX Silver witnessed a bearish trend following its positive close on Wednesday last week. Around 9:30 am, he was observed trading at $74,015 per kg, reflecting a decrease in $123 or 0.17%. However, despite this short-term setback, silver futures have shown a significant rise of almost $2,859 or 4.01% in March. So far this year, they have experienced a marginal drop of 0.39% or $292, according to the analysis provided by the commodity and currency expert.
The rise in gold prices can be attributed to the decline in the Dollar Index (DXY), which has once again fallen below the 104 mark. It currently stands at 103.80 against a basket of six major currencies. , which shows a certain degree of stability. Over the last five trading sessions, the dollar index has seen a 0.17% depreciation.
Also Read: Gold Price Hits New High Today as US Fed Testimony Sends US Dollar Index Down to 5-Week Low
“Despite this lowering of rate cut expectations, gold is showing relative resilience. Geopolitical tensions in the Middle East and concerns about global growth are acting as tailwinds. While the US economy has managed to weather high borrowing costs and tight credit conditions thanks to US fiscal spending as consumers deplete their savings, support from these factors is expected to wane in 2024, dragging down growth. Rising credit card and auto delinquencies in the United States indicate weakness ahead. US inflation is also slowly but steadily moving towards the Federal Reserve’s 2% target, which should also support rate cuts. “Furthermore, rapidly rising interest costs on the $34 trillion U.S. national debt are expected to impact policymakers’ decision-making, prompting them to cut rates,” said Chirag Mehta, chief investment officer at Quantum. AMC.
Where are gold prices headed?
According to data from the World Gold Council, gold acquisitions by central banks in 2023 amounted to 1,037 tons, slightly below the record set in 2022.
“We believe this trend is likely to continue this year amid geopolitical tensions and uncertainty on the macroeconomic front and act as a soft support for gold prices. As aggressive bets on Fed rate cuts fade, global gold ETFs have seen net outflows. On the other hand, domestic gold ETFs recorded inflows of Rs 657 crore in January, likely driven by investors’ need to diversify their investments as stock markets are gradually becoming more expensive,” Mehta said.
He further added: “Gold prices could remain volatile in the coming months as the market reacts to geopolitical developments and US monetary policy. “The medium-term outlook for the precious metal looks promising given the impending change in the US interest rate cycle.”
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Posted: Mar 8, 2024, 07:56 pm IST