According to commodity market experts, major reason for rise in gold rates can be attributed to sharp rise in crude oil prices. They said that crude oil prices registered around 12 per cent rise in the week gone by, which raised concern about the global inflation and economic slowdown. They said that spot gold price is now heading towards $1,780 levels whereas MCX gold rate can be seen around ₹53,000 per 10 gm by Diwali 2022. However, they said that there can be some profit booking taking place in yellow metal price after upbeat US job data and advised gold investor to buy around ₹51,200 to ₹51,000 levels on MCX and at $1,680 levels in spot market.
Reasons for gold price rally
Speaking on the reason for rise in gold rates across globe, Sugandha Sachdeva, Vice President — Commodity & Currency Research at Religare Broking said, "It was the second consecutive week of gains for gold prices where the yellow metal zoomed higher by around 3.54 percent. Prices were supported on the back of softening witnessed in the greenback which led to renewed safe haven flows in gold. Meanwhile, crude oil prices registered gains of around 12 percent for the week, which further raised concerns about widespread inflationary pressures, and fueled gains in the precious metal." She said that precious metal was seen facing resistance around the key $1,740 per ounce mark, while at the domestic markets ₹52,100 per 10 gm mark acted as a stiff hurdle for prices. The depreciation in the Indian rupee towards record lows of around 82.40 mark was however a key variable that underpinned domestic gold prices.
However, the Religare expert said that hawkish rhetoric from several Fed officials indicating that the Fed is not likely to pause its policy tightening any time soon and strong US jobs report for September again provided an upward thrust to the dollar index. This took some sheen off the yellow metal towards the close of the week. The US economy added 2,63,000 jobs as compared to estimates for 2,50,000 jobs while the unemployment rate also dropped to 3.5 percent as compared to 3.7 percent in August.
US Job data impact on US Fed rate hike
On how this strong US job data is going to impact gold prices, Ritika Chhabra, Economist and Quant Analyst at Prabhudas Lilladher said, "Non-farm Payrolls in the US rose by 2,63,000 in September, better than market expectation of 2,55,000. The unemployment rate surprisingly dipped to 3.5 per cent from 3.7 per cent recorded last month. Job strength was particularly observed in leisure, hospitality and health care, indicating sustained tight labour conditions in services sector. The Fed isn’t going to like this strong report as it clearly wants the labour market to weaken sharply to avoid a so-called wage-price spiral in which workers demand ever-higher pay to stay ahead of inflation and companies pass those higher wage costs on to consumers. Markets are now pricing in another 75 bps hike in the next FOMC meeting on 2nd November."
Gold price outlook
Expecting some breaks on gold price rally after upbeat US job data, Anuj Gupta, Vice President — Research at IIFL Securities said, "Gold rates have ascended to around one month high and due to upbeat US job data, market would discount gold prices as US Fed may decide to raise interest rates and keep the inflation under control. So, we are expecting some profit booking in gold prices in the beginning of next week. However, this dip should be seen as buying opportunity as bull trend in yellow metal is expected to continue. Spot gold price may go up to $1,760 or may be $1,780 per ounce levels by Diwali 2022 and MCX gold rates are expected to hit ₹53,000 per 10 gm in this time."
Echoing with Anuj Gupta's views, Sugandha Sachdeva of Religare Broking said, "We feel there may be some dips in gold prices as the upbeat labor market is likely to keep the Fed on course toward aggressive rate hikes. Nonetheless, dips towards ₹51,200 to ₹51,000 per 10 gm mark and around $1680 per ounce should be construed as buying opportunities for higher targets of around ₹52,700 per 10gm and $1780 per ounce in the coming days. Prices would largely be dictated by the minutes of the Fed’s last policy meeting and key September inflation data from the US lined up next week."
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
