Gold closes flat after a stellar rally

The demand trajectory is expected to remain robust due to the ongoing wedding season, which is expected to keep demand for gold and jewellery on the higher side | Photo Credit: NAGARA GOPAL

After significant rally in last few days, gold prices fell by ₹29 per 10 grams to ₹62,367 on Friday as rupee strengthened against dollar even as the undertone for the yellow metal remain bullish in the long term.

Being a dollar-denominated metal, gold weakens when rupee strengthens.

Thanks to the US Federal Reserve’s dovish stance, gold prices have soared ₹915 per 10 grams in the last one week, according to data sourced from the Indian Bullion and Jewellers Association.

Reflecting a bullish trend, gold for February delivery on MCX was up ₹105 at ₹62,559 per 10 grams, while the April contract gained ₹97 per 10 grams to ₹62,920 on Friday. In the international market, prices were flat at about $2,035 per ounce.

Ajay Kumar, Director, Kedia Commodities, said the long-term view on gold remains bullish and may test $2,440 an ounce by end of next year.

However, he said in the near-term there may be a pull-back as the market has already priced in all the positive events supporting gold prices. Moreover, global investors would prefer to book profit at higher levels before going on Christmas holidays, he added.

Though the US Fed kept interest rates unchanged in the last meeting, the commentary by the central bank was dovish. The US central bank officials unanimously decided to leave the target range for the benchmark federal funds rate at 5.25 per cent to 5.5 per cent, the highest since 2001.

Interestingly, policymakers have not made any projections on further interest-rate hikes for the first time since March 2021, based on the median estimate.

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Fed officials expect to lower rates by 0.75 per cent next year, a sharper pace of cuts than indicated in September’s projections. While the median forecast for the federal funds rate at the end of 2024 was 4.6 per cent.

10-day high

On Thursday, gold prices touched a 10-day high after the US dollar and Treasury yields slipped after the Federal Reserve signalled an end to its monetary policy tightening cycle.

The US spot gold was up 0.4 per cent at $2,034 per ounce, while gold futures settled 2.4 per cent higher at $2,044.90.

‘Trend to continue’

Colin Shah, MD, Kama Jewelry, said, “The guidance on interest rates was a gradual but steady approach to bring core inflation within the desired range of 2 per cent. Lower interest rates bode well for the gold, gems, and jewellery sector at large.”

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“Gold has been making new highs and is expected to continue the bullish trend given the geopolitical tensions and a slowdown in global economic growth,” he said.

On the domestic front, he added that the demand trajectory is expected to remain robust due to the ongoing wedding season, which is expected to keep demand for gold and jewellery on the higher side.

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