1 week ago
Gold Reaches Three-Month High as Rate Outlook Shifts
Gold has become more expensive after falling for several weeks.
Its price is now at its highest point in more than three months.
Investors are buying more gold because the US dollar has weakened and interest-rate increases seem less likely.
Lower interest rates can make gold more attractive because gold does not pay interest.
US Treasury actions to manage government debt also helped push bond yields lower.
In India, people are buying more gold for jewelry and as an investment before the festive season.
Some shoppers returned after waiting for prices to fall.
Analysts think gold could rise further, but they also expect price swings because many economic and political factors remain uncertain.
Gold rose above $4,630 per ounce, its highest level since mid-May, after weeks of correction.
Prices have climbed more than 16% from last month’s $3,900-$4,000 range and reached about ₹1.6 lakh per 10 grams in India.
A weaker dollar, lower Treasury yields and reduced expectations of a Federal Reserve rate hike have supported gold demand.
Markets now price a 38% chance of a rate hike this month, down from nearly 84% a month earlier.
Indian jewelry and investment demand has strengthened ahead of the festive season, though analysts warn that volatility may continue.
- Who
- Gold investors, the Federal Reserve, the US Treasury, Indian jewelry buyers and market analysts are involved.
- What
- Gold prices rebounded to a more-than-three-month high as expectations of a Federal Reserve rate hike eased and Indian demand improved.
- Where
- The move is occurring in global markets, including the London Bullion Market Association and India’s Multi Commodity Exchange.
- When
- The rally followed weeks of correction; gold reached its latest high after a US Treasury announcement last week, with a Federal Reserve speech expected later this week.
- Why
- A weaker dollar, lower Treasury yields, reduced rate-hike expectations, safe-haven interest and stronger Indian festive-season demand have supported prices.
Bullish outlook
Cautious outlook
Future price direction
Bullish outlook
Analysts cited easing rate-hike concerns, a weaker dollar and stronger demand as reasons gold could rise toward $4,900-$5,000.
Cautious outlook
Market participants said prices need to consolidate within a range to improve investor confidence and reduce uncertainty.
Interest-rate outlook
Bullish outlook
Markets increasingly expect the Federal Reserve to keep rates unchanged because growth and labor-market data have slowed.
Cautious outlook
The outlook remains clouded, and additional economic data and the Federal Reserve’s policy signals could still change expectations.
Market stability
Bullish outlook
The World Gold Council said Treasury-market conditions could invite substantial interest in gold, with positives likely outweighing negatives.
Cautious outlook
Analysts warned that gold may remain volatile because the outcome of the war and other variables are unknown.
Key facts
- Gold price
- Above $4,630 per ounce on the London Bullion Market Association.
- Recent gain
- More than 16% above last month’s $3,900-$4,000 levels.
- Indian price
- Around ₹1.6 lakh per 10 grams on the Multi Commodity Exchange.
- Rate-hike probability
- Markets price a 38% chance of a Federal Reserve hike this month, compared with nearly 84% a month earlier.
- Treasury action
- The US Treasury said it would at least double buybacks of longer-term bonds to help maintain yields.
- Indian demand
- Jewelry and investment demand has picked up as the festive season approaches.
- Potential target
- One domestic commodities analyst said gold could reach $4,900-$5,000 if current conditions continue.
Quotes
Johan Palmberg
Senior Quantitative Analyst at the World Gold Council
“It (the outlook) is turning more bullish, but there will be a lot of volatility in the way because we don’t know the outcome of the war and all other variables. But for now, it seems that prices have turned a corner.”
indianexpress.com
“Our view is that the positives would likely outweigh the negatives and likely invite substantial interest in gold.”
indianexpress.com
Kavita Chacko
Head of research for India at the World Gold Council
“Jewellery demand has reportedly strengthened, as consumers viewed recent price action as a buying opportunity. Industry feedback suggests that deferred purchases returned to the market, resulting in higher footfall and a recovery in demand beyond essential wedding-related purchases.”
indianexpress.com
Sources
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