Gold prices on Thursday surged Rs 77 to Rs 46,465 per 10 gram in the futures trade, as speculators created fresh positions on a firm spot demand.
A day ago, Gold traded at $1,734 per ounce in the US markets, while the MCX gold stayed flat with a Rs 76 rise to Rs 46,038 per 10 gram on Wednesday.
A revival in global economic fundamentals seems to have taken the sheen off gold as a preferred investment option with the gold prices hitting its four-month low in the international markets after the US job data churned out better-than-expected figures last week.
“Gold prices have been on a downward trend. It has lost almost Rs 2,000 per 10 gram in value in the last two weeks,” said Nish Bhatt, Founder and CEO, investment consulting firm Millwood Kane International.
“The latest US jobs data released was better than expected. It led to a boost in the US Dollar and Treasury yields. A stronger dollar makes gold expensive.”
An improving employment scenario fuelled the fear that the US Fed might start tightening the monetary policy earlier than expected. This will tend the local interest rates to rise. High interest rates reduce the appeal for investment in gold. Also, an expectation of a quicker recovery in the economy will reduce uncertainties and thereby the investor’s interest in gold as a safe heaven.
“The dollar and the benchmark 10-year treasury yields jumped after the data, denting non-yielding gold’s appeal. The US employers hired the most workers in nearly a year in July and continued to raise wages, giving the economy a powerful boost,” said Navneet Damani, VP – Commodities Research, Motilal Oswal Financial Services.
Market participants worry that the US recovery and rising inflation might spur the Fed to pull back on unprecedented economic support. A clearer picture is expected to emerge after the US inflation data is released later this week.
Rising inflation in some countries may force their respective central banks to tighten the monetary policy and raise gold prices.
Going forward, the way different countries control the spread of the new variants of the Coronavirus, drive recovery in the global economy, and the pace at which global central banks unwind their easy monetary policy regime will guide the gold prices.
Ravindra Rao, VP and Head of Commodity Research at Kotak Securities, thinks that gold inched up on dip buying on Wednesday and is supported by increased geopolitical tensions, rising virus cases, mounting inflationary pressure and concerns about Chinese economy. However, weighing on the gold price is the firmness in the US dollar and the weaker investor interest.
“The general bias for gold is on the downside amid increased debate about Fed’s monetary tightening, however, the recent sell-off seems overdone and some recovery is possible”, he said.
Broader range on COMEX could be between $1,720-1,775, while on the domestic front, gold prices could hover in the range of Rs 45,800-46,335, Damani said.
