Most recent article: India Gold price Thursday: Gold keeps rallying, according to MCX data
Gold prices rose in India on Wednesday, according to data from India's Multi Commodity Exchange (MCX).
Gold price stood at 62,966 Indian Rupees (INR) per 10 grams, up INR 527 compared with the INR 62,439 it cost on Tuesday.
As for futures contracts, Gold prices increased to INR 63,350 per 10 gms from INR 63,025 per 10 gms.
Prices for Silver futures contracts decreased to INR 75,143 per kg from INR 75,026 per kg.
| Major Indian city | Gold Price |
|---|---|
| Ahmedabad | 65,240 |
| Mumbai | 64,990 |
| New Delhi | 65,065 |
| Chennai | 65,220 |
| Kolkata | 65,175 |
Global Market Movers: Comex Gold price hovers near three-week high
- Comex Gold price trades near a three-week high around $2,065 as a sharper-than-projected decline in the United States core PCE price index data has fuelled bets in favour of early rate cuts by the Fed.
- The US core PCE price index data softened to 3.2% vs. the estimates of 3.3% and the former reading of 3.5%. On a monthly basis, the underlying inflation data grew slightly by 0.1% while market participants projected a steady growth of 0.2%.
- It is worth noting that the Fed forecasted core PCE price index at 3.2% by the year-end in its Summary of Projections (SOP) released last week. This indicates that the Fed has achieved its inflation target of 2023.
- This greater-than-projected decline in the Fed’s preferred inflation tool may force policymakers to endorse rate cuts sooner than previously thought.
- As per the CME Fedwatch tool, market participants are pricing in a more than 71% odds chance of an interest rate cut in March. The likelihood of a second rate cut in May is more than 68%.
- Till now, Fed policymakers have been pushing back rate cut expectations, citing the need for a restrictive interest rate policy for a longer period to ensure the achievement of price stability.
- A significant decline in the US inflation data is setting a better start for the Fed for 2024, which would allow them to achieve a soft landing for the economy. Such a soft landing would enable price stability without triggering a recession.
- Apart from the US core PCE price index data, investors also focused on the Durable Goods Orders for November, released on Friday.
- New orders for durable goods rose at a stronger pace of 5.4% against expectations of 2.2%. In October, orders of durable goods contracted by 5.1%.
- Subsiding inflation in the US economy has boosted consumer confidence. The Michigan Consumer Sentiment index for December, released last week, rose to 69.7, against projections and the former reading of 69.4.
- Deepening rate cut expectations by the Fed have weighed heavily on the US Dollar and Treasury yields.
- Lower interest rates, or their expectation, tend to reduce foreign capital inflows negatively impacting a currency.
- The US Dollar Index hovers near a five-month low below 101.50 and 10-year US Treasury yields have dropped further to near 3.87%.
- This week, the economic calendar will be light due to it being a holiday week while the second-tier weekly jobless claims data will be in focus.
(An automation tool was used in creating this post.)
Gold FAQs
Why do people invest in Gold?
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Who buys the most Gold?
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
How is Gold correlated with other assets?
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
What does the price of Gold depend on?
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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