Gold is considered a hedge against inflation and investors prefer this metal for long-term investments due to its high return history. This week, gold prices in India have recovered significantly, after showing a downward trend for a few days. The gold market jumped around Rs. 800 in the past three days, even after an interest rate hike by the US Fed. The US central bank raised its interest rate by 75 basis points to control the rise in the inflation rate, which should have been negative for the gold market. However, gold reacted positively as this level of rate hike was expected by investors. The market absorbed the rise and on the international futures market, gold prices reached 1,772.50/oz. With a similar impact in India, 22 karat gold rates today stood at Rs. 47,200/10 grams, and 24 karat gold prices stood at around Rs. 51,490/10 grams .
Additionally, the US Dollar Index also weakened slightly this week, which helped commodity markets surge. A falling US dollar index is positive for gold rates as the yellow metal is a dollar-dominated asset class.
Today, Comex gold futures were quoted at $1,772.50 an ounce, gaining 0.76% from the last day of trading. It was last quoted at $1,759/oz yesterday. The yellow metal has fallen 3.64% this year in the futures market. Spot gold prices were last quoted at $1,767.50 an ounce, gaining 0.55% from the last day of trading. The US dollar index was quoted at 105.87. In India, Mumbai Commodity Exchange (MCX) gold in October was quoted at Rs. 51,605/10 grams, up 0.31%, since the last trading day.
However, on the current state of the gold market, analyst Phillip Streible commented to Kitco News: “The drivers that affect gold the most are currency fluctuations, the economy, geopolitics, growth and inflation. I think equities will continue to see lower earnings forecasts for Therefore, I recommend being nimble on these bare market rallies and reducing exposure until the Fed finishes tightening and reducing the Gold exposure in the monthly resistance zone.
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Article first published: Saturday, July 30, 2022, 11:42 p.m. [IST]