Gold Prices Hit A Record High Of Rs 61,490 As US Fed Hints At Pausing Rate Hikes

Gold futures on the MCX hit an all-time high of Rs 61,490 per 10 grams on Thursday, following a surge in international bullion prices, spurred by a 25 basis point hike in US interest rates by the Federal Reserve. The price of gold has been steadily increasing due to a weakening US dollar. After the US Federal Reserve's announcement, the international spot market for gold hit a new record of $2081.80 per ounce on Wednesday.

At 12.30 p.m., the domestic gold price was Rs 62,180. On the domestic market, 10 grams of 22-carat gold now cost Rs 57,000 as opposed to Rs 56,500 on Wednesday. The cost of 10 grams of 24-carat gold increased from Rs 61,640 to Rs 62,180.

Gold futures (June 5) were up 0.59 percent or Rs 360 on the MCX, trading at Rs 61,325 for 10 grams. On May 4, 2023, the MCX Gold June futures ranged in price between Rs 61,200 and Rs 60,335. Silver futures (as of July 5) were up Rs 818 or 1.07 percent, coming in at Rs 77,400 a kg. International gold prices reached a record high of $2081.80 per troy ounce earlier today.

"MCX Gold has seen a great start to this year posting a YTD return of ~10%, marking lifetime highs. The metal has witnessed sharp volatility, and there are a lot of factors supporting prices on the lower end. Major central banks since past one year have been aggressively raising interest rates with an objective to calm the inflationary pressures; but now market participants are expecting a slowdown or even a pause in the rate hike cycle. US Inflation has also fallen from its peak of ~9.1% reported last year to ~5%; however recent comments from Fed officials suggest that inflation is still far away from its 2% target. The recent move in gold is primarily driven by the weakness in the dollar and ongoing concerns in the US banking sector. Fed's in its last meeting suggested that it will continue to remain "Data-Dependent" and thus it will be important for market participants to keep an eye on some of the important economic numbers like retail sales, GDP, Inflation and jobs data. Commentary by the Fed governor suggests that there could be a pause on raising rates in this year and that could weigh on the dollar Index and US Yields. Investment demand is again starting to pick up in this year thereby supporting the overall sentiment for gold. Metal on the domestic front has also received support from rupee depreciation and recent changes in import duty.According to Mr. Manav Modi, Analyst, Commodity and Currencies at Motilal Oswal Financial Services.

The Fed increased interest rates by 25 basis points, but did so without including language in its policy statement indicating that it "anticipates" the need for additional rate hikes.

However, Fed Chair Jerome Powell stated in his press conference that inflation remained the main concern and that there was a greater likelihood that the US economy would avoid a recession, though he did not completely rule out a mild one.

"But the debt ceiling debacle will rumble on and together with long-term sticky inflation at a higher than current priced in level we see the prospect for higher (gold) prices still," Hansen added.