Gold prices have seen a bounce back in July after a 3.30% correction in June. Bargain buying and signs of a cool-off in the US labor market have supported the rise
Gold rate today: After losing to the tune of 3.30 per cent the June month rally, gold prices ushered in the month of July on a promising note. Despite US Fed rate hike concern has been working as a taper for the gold price rise, bargain buying has supported bounce back in the bullion metal from the support levels. Gold future contract on Multi Commodity Exchange (MCX) for August expiry ended ₹391 per 10 gm higher on Friday in the week gone by, logging to the tune of 0.65 per cent intraday rise on the weekend session. However, this rally came only after the gold price on MCX hit three-month low of around ₹58,350 per 10 gm levels.
On why gold price are giving such movement, Sugandha Sachdeva, Executive Director & Chief Strategist at Acme Investment Advisors said, “Gold prices have started the first week of July on a promising note, after witnessing a correction of around 3.30% in June. Concerns about the US Fed keeping interest rates elevated for a longer period had suppressed gold prices. However, the yellow metal has been supported by bargain buying at lower levels as well as by some signs of a cool-off in the US labor market and a decline in the dollar index. The US jobs report for June showed that the economy added 209,000 jobs, below the consensus forecast of 225,000. However, private sector payrolls rose by more than double the forecast.”
“This suggests that the labour market is still strong, but there may be some signs of a slowdown. This has eased concerns about the Federal Reserve raising interest rates too aggressively. This has supported gold prices, which are seen as a hedge against inflation and rising interest rates,” Sugandha added.
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Gold price outlook
Expecting bounce back in gold prices in near term, Nirpendra Yadav, Senior Commodity Research Analyst at Swastika Investmart said, “The fall in the precious metal in the month of June now seems to have stalled, and gold is holding above the $1900 an ounce level in Comex futures. MCX gold has registered a gain of 0.5 percent in the last week, and the prices have been at ₹58500 per ten grams. Silver prices also rose by 0.4 percent to ₹70,300 per kg during the week. Last week, Fed meeting minutes hinted at further interest rate hikes to control inflation, prompting a rise in US benchmark Treasury yields from 3.8 percent to 4 percent.”
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The Swastika Investmart expert went on to add that the dollar, which moves in the opposite direction of gold, remained under pressure last week despite rising Treasury yields as members of the world’s biggest oil exporters, Saudi Arabia and Russia, cut oil supplies on Monday in an effort to prop up crude prices. US unemployment claims and Jolts job opening data have been recorded weaker than expected, while softening global stock markets are making precious metals attractive.
On outlook for gold price, Sugandha Sachdeva said, “Looking ahead, the price set-up indicates a strong base in sight at $1,890 per ounce and around ₹57,500 to ₹57,600 per 10 gm. This momentum is likely to continue for the week ahead, where dips could be used to accumulate the yellow metal. We expect gold prices to edge higher towards ₹59,200 to ₹59,250 per 10 gm in the near-term from where prices have shown a rebound.”
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.
