India Bullion
Gold rises on Fed rate cut hope, ETF inflows
This story was originally published at 20:54 IST on 16 July 2024
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By Sandeep Sinha
MUMBAI – Futures contracts of GOLD rose today on the Multi Commodity Exchange of India and the COMEX as bets of the US Federal Reserve’s interest rate cut grew louder. The positive sentiment in yellow metal was also supported by inflows in gold exchange-traded funds.
According to the CME FedWatch tool, markets are now pricing in an 88% chance of the Fed cutting interest rates by 25 basis points at its September meeting. Over 62% expect the possibility of another 25-basis-point cut at the November meeting and another 58% anticipate a 25-basis-point cut in December.
The yellow metal is within a whisker away from record highs touched in May in domestic and international markets as sentiment was boosted by Fed Chief Jerome Powell’s comments in an interview with David Rubenstein. Powell said that the US consumer price index report does add somewhat to confidence that inflation is heading down to the central bank’s 2% goal.
On Monday, gold holdings with SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose by 1.44 tn to 836.53 tn. The fund has a market value of $65.09 bln.
At 1757 IST, the most-active August GOLD contract on the MCX was up 0.4% at 73,791 rupees per 10 gm. The same-month contract on COMEX was marginally higher by 0.8% at $2,448.10 per oz.
On the options front, the highest call open interest for gold is at 74,000-75,000 strike, which suggests a bullish view. On the downside, the highest put open interest is at 71,000-70,000 strike for the Jul 25 gold contract on the MCX.
"Gold prices saw positive movement as interest rate cut expectations increased among buyers, driven by lower inflation data last week. This has influenced the Fed watch tool towards the possibility of rate cuts rather than holding rates longer," Jateen Trivedi, vice-president and research analyst at LKP Securities said in an email note.
"Gold's outlook remains positive amidst a backdrop of dollar weakness, soft inflation data, and ongoing geopolitical uncertainties. Investors should view short-term pullbacks as buying opportunities, with the potential for gold to break out and achieve new highs beyond $2,500 in the coming months," Riya Singh, currency and commodities analyst at Emkay Global said in a note.
SILVER prices rose, taking firm cues from COMEX and a positive trend in gold. At 1800 IST, the most-active September contract for silver on the MCX was up 0.3% at 92,854 rupees per kg. The same-month contract on COMEX rose 0.2% at $31.00 per oz.
On the options front, the highest call open interest for silver is at 95,000-100,000 strike, which suggests a bullish view. On the downside, the highest put open interest is at 90,000-85,000 strike for the Aug 27 silver contract on the MCX.
The MCX Bulldex, an index that tracks the real-time performance of gold and silver futures on the MCX, was up 43 points at 18965 points. As of 1800 IST, the August and October contracts of gold recorded turnovers of 23.53 bln rupees and 5.55 bln rupees, respectively, on the MCX. At the same time, the September and December contracts of silver saw turnovers of 12.90 bln rupees and 814.32 mln rupees, respectively.
The spot gold-silver ratio, also known as the Mint ratio, was higher at 79.23, which indicates that gold outperformed silver. The ratio measures the ounces of silver required to buy an ounce of gold. The ratio was 78.57 on Monday.
Outlook for the rest of the session:
--MCX gold seen at 73,400–74,517 rupees per 10 gm
--COMEX gold seen at $2,425–$2,460 an oz
--MCX silver seen at 92,300-93,900 rupees per kg
--COMEX silver seen at $30.85-$31.20 an oz
End
US$1 = 83.58 rupees
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Vidhi Verma
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