The MCX gold prices in India surged on Friday due to the release of US Consumer Price Index data. The surprise rally in gold prices was principally started by the dampening of US inflation fears, thus raising speculations of a possible 25-basis-point cut in interest rate in the ensuing US Federal Reserve meeting.
It leaped above 1% to $2,657.26 per ounce. At COMEX, the gold price jumped around 1.32% and settled at $2,674.20 per troy ounce.
HDFC Securities Head of Commodity & Currency, Anuj Gupta said that the US CPI data matched market expectations. However, though US consumer prices increased marginally in September, annual inflation growth rate declined to a three-and-half-year low.
Easing inflation has relieved the economic pressure on the US. Therefore, a rate cut is more plausible. This probable rate cut has helped gold prices rally a bit.
Other US economic data such as jobless claims and crude oil prices also support interest rate cuts, according to Jateen Trivedi of LKP Securities. High crude oil prices hint at persistent inflationary pressures in the US economy.
While the global macro-economic environment, gold-dollar relationship and bond yield play an important role in gold price movements, it is still US interest rate policy that sets the tone for gold price action.
Iran-Israel war and its affect on MCX gold prices in India
According to Ameya Ranadive of StoxBox, any signs of a weakening US economy might further lift safe-haven demand for gold. Apart from that, geopolitical tensions are yet another major factor contributing to its price, such as the Israel-Iran war. “Tensions are growing, and this will increasingly favor gold as an asset of safety,” he added.
International spot gold has fallen in the range of US$ 2,640-2,700 per troy ounce. MCX gold rate in India has broken its resistance at ₹ 76200 – ₹ 76250.
The rise in the prices of gold in the country is also because of the falling Indian National Rupee INR against the US dollar. Anuj Gupta, who works at HDFC Securities, said that MCX gold prices in India may jump up to ₹78,000 per 10 gm by Diwali 2024.
The current geopolitical tension in the Middle East can be expected to continue driving MCX gold prices in India higher. Any resolution or breakthrough in Middle East tensions could stop or reverse upward momentum in gold prices.
High jobless claims in the US further support the case for potential interest rate cuts. Gold is seen as a safe haven in times of economic and geopolitical uncertainty.
Still, economic data like the US CPI are considered a leading factor that dictates the trends in the gold market. Investors closely follow Federal Reserve decisions for indications of future interest rate actions.
Any widening geopolitical conflict-particularly in the Middle East-could further enhance demand for gold in global markets.
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