The global gold market has continued its upward trend as easing inflation in the United States spurs speculation about a potential interest rate cut by the Federal Reserve. This development has driven gold prices to new heights, with both international and domestic markets seeing significant gains.
US Inflation Data Sparks Gold Rally
The recent release of the US Consumer Price Index (CPI) data played a crucial role in the ongoing surge in gold prices. On Friday, the MCX gold rate in India closed at ₹76,307 per 10 grams, while the spot gold price soared over 1%, reaching $2,657.26 per ounce. Similarly, the COMEX gold price saw a 1.32% increase, closing at $2,674.20 per troy ounce.
This rally was largely attributed to the easing of US inflation concerns, as reflected in the CPI data. The numbers revealed a slight increase in consumer prices in September, but the annual inflation growth rate was the smallest in over three years. This has eased some of the inflationary pressure on the US economy, fueling speculation that the Federal Reserve might reduce interest rates by 25 basis points at its next meeting.
Anuj Gupta, Head of Commodity & Currency at HDFC Securities, commented on the significance of the CPI data, stating, “The US CPI data released on Thursday met market expectations. While consumer prices were slightly above estimates, the overall inflation growth for the year is the smallest we have seen in the last three and a half years. This has significantly eased the inflationary pressure on the US economy, leading to speculation about a rate cut in the upcoming Federal Reserve meeting.”
Factors Behind Gold’s Bullish Trend
Several global factors have contributed to the sustained bullish trend in gold prices. Among them is the economic data coming out of the United States, which continues to support the likelihood of interest rate cuts. High jobless claims and elevated crude oil prices indicate ongoing inflationary pressures, which in turn, have boosted gold’s appeal as a safe-haven asset.
Jateen Trivedi, VP Research Analyst—Commodity and Currency at LKP Securities, noted, “The US data supports the continuation of interest rate cuts, particularly because of high jobless claims and rising crude oil prices, both of which contribute to inflationary pressure. This has been a positive factor for gold prices.”
Moreover, the strength of the US dollar and bond yields has also had an impact on the movement of gold. Gold tends to perform better in times of economic uncertainty or when inflation threatens to erode the value of currencies. As global markets keep a close watch on US economic indicators, any sign of a softening US economy could increase demand for gold, pushing prices even higher.
Ameya Ranadive, Senior Technical Analyst at StoxBox, explained, “Fundamentally, gold has been influenced by global macroeconomic conditions, particularly the strength of the US dollar and bond yields. The Federal Reserve’s stance on interest rates continues to be a key driver for gold prices. If we see any indication of a weakening US economy in upcoming economic data, we could witness an increase in safe-haven demand for gold.”
Geopolitical Tensions Add to Gold’s Appeal
Beyond economic factors, geopolitical tensions also play a critical role in driving gold prices. The ongoing conflict between Israel and Iran has added an additional layer of uncertainty to global markets, causing investors to flock to gold as a reliable store of value.
The escalation of tensions in the Middle East, particularly the Israel-Palestine conflict, has further boosted gold’s safe-haven status. Any major developments in the region could lead to further increases in gold demand, especially if the conflict disrupts oil supplies and pushes crude prices higher. Since higher oil prices tend to exacerbate inflationary pressures, this could drive even more investors toward gold.
A market expert from StoxBox emphasized the importance of monitoring geopolitical events, saying, “Geopolitical tensions like the Israel-Iran war can have a significant impact on gold prices. Recent developments in the Israel-Palestine conflict have already caused a surge in safe-haven demand for gold. Any further escalation in these tensions, or a significant shock to oil prices, could drive gold prices higher.”
Gold Rate Outlook: Key Levels to Watch
As gold prices continue their upward momentum, market analysts are keeping a close eye on key price levels in both international and domestic markets. In the global market, the spot gold price is expected to remain in the $2,640 to $2,700 per troy ounce range. In India, the MCX gold rate has already breached a key resistance level, closing above ₹76,300 per 10 grams.
Anuj Gupta of HDFC Securities shared his outlook on gold prices, stating, “The international spot gold price is currently in the range of $2,640 to $2,700 per troy ounce, while the MCX gold rate has crossed the ₹76,300 mark. The weakness of the Indian rupee against the US dollar has also contributed to the rise in domestic gold prices. If the geopolitical situation in the Middle East remains unresolved, we could see the MCX gold rate touch ₹78,000 per 10 grams by Diwali 2024.”
Gold Prices Surge in Delhi
In the domestic market, gold prices in Delhi saw a significant jump on Friday, rising by ₹1,150 to ₹78,500 per 10 grams. This increase brings gold prices in the national capital near all-time highs, driven by fresh buying from jewellers amid the positive global trend.
According to the All India Sarafa Association, gold of 99.9% purity closed at ₹77,350 per 10 grams on Thursday, but Friday’s rally pushed prices higher, reflecting the global surge in demand for the precious metal.
The surge in gold prices in India is not just a result of global trends but also due to the weakness of the Indian rupee against the US dollar. As the rupee depreciates, the cost of importing gold increases, leading to higher prices in the domestic market.
Conclusion: A Bright Future for Gold?
As inflation concerns ease in the US and geopolitical tensions remain high, gold appears to be on a strong upward trajectory. With the possibility of a Federal Reserve rate cut in the near future and the ongoing instability in the Middle East, gold’s safe-haven appeal is likely to persist. Market analysts are closely watching key price levels, and the precious metal could see further gains in both global and domestic markets in the coming months.
The outlook for gold remains positive, with many experts predicting that prices will continue to rise, especially if the current economic and geopolitical conditions persist. Investors looking for a safe-haven asset in times of uncertainty may find gold to be an attractive option as it retains its value amid market volatility.
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