Gold Price Dips for Second Consecutive Week Amidst Anticipation of Higher US Federal Reserve Rates
Gold prices saw a decline for the second consecutive week, as investors anticipated higher interest rates by the US Federal Reserve. The UK and Japan's weak economic indicators further exerted pressure on the precious metal, prompting some investors to engage in bottom fishing within the bullion market.
On the international front, gold prices hit a two-month low of approximately $1,992 per ounce, triggered by unexpectedly high US Consumer Price Index (CPI) data. Despite a short-lived rally, gold failed to fully recover from its recent losses, with future contracts on the Multi Commodity Exchange (MCX) for April 2024 expiry closing lower for a second week.
Higher-than-expected US CPI data is said to be responsible for the recent pressure on gold prices, leading experts to suggest that the US Federal Reserve might maintain interest rates to address ongoing inflation concerns. Consequently, the US dollar rose to a three-month high, although softer-than-expected US retail sales data allowed for a brief recovery in gold prices.
Anuj Gupta of HDFC Securities explained that the anticipation of prolonged higher interest rates until mid-2024 resulted in increased demand for the US dollar, thereby putting pressure on gold prices. However, a release of softer retail sales data provided some respite, allowing gold prices to rebound from their two-month lows.
Sugandha Sachdeva from WealthWave Insights highlighted the volatility of gold prices, as they initially slid before recovering some losses, ultimately closing lower. The sell-off in gold was primarily triggered by higher-than-anticipated inflation figures from the US CPI. Despite pressure from the strong dollar, softer retail sales data and weaker economic indicators from the UK and Japan renewed interest in gold as a safe haven asset.
Looking ahead, experts generally believe that the outlook for gold and silver remains positive due to geopolitical tensions. However, they also caution that potential profit-taking at higher price levels may occur. Gold is expected to face resistance around the ₹62,400 per 10 gm mark, while silver may encounter resistance near the ₹72,700 per kg mark. Investors are advised to keep an eye out for price pullbacks as favorable entry points could arise around ₹61,200 per 10 gm for gold and ₹71,000 per kg for silver. Furthermore, market participants are eagerly awaiting the release of the Federal Open Market Committee (FOMC) minutes for further insights into the Federal Reserve's monetary policy stance and its potential implications for precious metals.
Please note that these views and recommendations have been provided by individual analysts and experts, and not by Mint. Investors are advised to consult with certified experts before making any investment decisions.
Analyst comment
Negative news: Gold price dipped for the second consecutive week, influenced by anticipation of higher US Federal Reserve rates and weak economic indicators from the UK and Japan.
As an analyst, it is likely that the market will continue to experience pressure on gold prices due to the expectation of higher interest rates and ongoing inflation concerns. However, volatile conditions and geopolitical tensions may provide some support for gold and silver. Investors should consider potential profit-taking at higher price levels and look for opportunities during price pullbacks.
