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Rising optimism for a US Fed rate cut and weakness in US dollar rates have propelled gold prices to a six-week high at $2,391 per ounce in the international market. In the domestic market, gold futures on the Multi Commodity Exchange (MCX) for August 2024 expiry regained the ₹73,000 mark, logging around a 2% weekly gain. On Friday, MCX gold rates surged by ₹671 per 10 gm, finishing at ₹73,038. Similarly, silver prices climbed to a four-week high, ending at $31.20 per ounce in the international market.
Commodity market experts attribute the uptrend in gold prices to the anticipated US Fed rate cut, which has weakened the US dollar. A rate cut typically makes gold more attractive to investors as the US dollar declines. Easing US inflation concerns, fueled by better-than-expected US job data and the US core PCE index showing the lowest annualized increase in over three years, have further supported the gold price rally.
Key factors influencing gold prices
- US Fed Rate Cut: The anticipated rate cut has pressured the US dollar, boosting gold prices. Head of Commodity & Currency at HDFC Securities, noted, “Gold prices in the international market have climbed to a six-week high, and silver rates have touched a four-week high due to easing US inflation concerns, boosting the US Fed rate cut buzz.”
- Market Sentiment: Commodity Researcher at Kotak Securities, highlighted that Comex Gold extended gains amid rising bets on a Federal Reserve rate cut before year-end. “Swaps traders are now pricing in a 70% chance of a rate cut in September,” she said.
- Economic Data: The latest US Nonfarm Payrolls report showed a probable increase of 190,000 jobs last month, with unemployment holding at 4%, the highest in over two years. This data could strengthen the case for the Fed to start cutting interest rates, potentially boosting gold prices further.
The US Consumer Price Index (CPI) data for June is scheduled for releasing in next week. This data will further influence the US central bank’s rate-cut path and, consequently, gold prices. The CPI data will be critical in confirming whether inflation is indeed cooling, which would bolster the case for a rate cut and likely support higher gold prices. The combination of a weaker US dollar, potential US Fed rate cuts, and key economic data releases are set to continue influencing gold prices, making it a crucial period for investors and market watchers.