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Informist, Thursday, Jan. 16, 2025

By Sandeep Sinha

MUMBAI – Futures contracts of gold rose on the Multi Commodity Exchange of India and the COMEX on Thursday because lower-than-expected US consumer price data boosted hopes of multiple interest rate cuts by the Federal Reserve. The expectation of lower interest rates increases the appeal of non-yielding assets such as gold.

The US consumer price index rose 2.9% on year in December, against 2.7% in November, according to the US Bureau of Labor Statistics data on Wednesday. On a monthly basis, the CPI rose 0.4%. Core CPI rose 3.2% on year in December, lower than the 3.3% rise in November.

"Encouraging CPI data, especially the first decline in core CPI in six months, following softer-than-expected PPI data helped commodities extend recovery as markets are now looking at a possibility of two rate cuts this year as participants see the first rate cut in March," Praveen Singh, associate vice-president, fundamental currencies and commodities, Mirae Asset Sharekhan, said in a note. "Gold is getting additional support from the reports that China may cut reserve requirement ratio (RRR) before January 28, the start of Lunar Holidays," Singh said.

The World Gold Council said in a report that the People's Bank of China bought 10 tonnes in December, the second straight month of purchases, which supported prices. Gold reserves with the Chinese central bank climbed to a record high of 2,280 tonnes in December, accounting for 5.5% of total foreign reserves.

At 1610 IST, the most-active February GOLD contract on the MCX rose 0.4% to INR 79,000 per 10 grams. The most-active February contract on the COMEX was 0.7% higher at $2,762.10 per ounce. The highest call open interest for gold was at INR 79,000-INR 80,000 strike prices, suggesting a bullish view. The highest put open interest was at the INR 77,000-INR 76,000 strikes for the Jan. 27 contract.

On Wednesday, gold holdings with SPDR Gold Trust, the world's largest gold-backed ETF, remained steady at 872.52 tonnes. The fund has a market value of $74.78 billion. On the National Stock Exchange, the total value of gold ETFs traded Thursday was INR 1.29 billion, up from INR 1 billion Wednesday.

SILVER contracts traded higher taking cues from COMEX and firm trends in gold and industrial metals. At 1616 IST, the most-active March contract on the MCX was up 0.6% at INR 93,400 per kg. The same-month contract on the COMEX was 1.1% higher at $31.88 per ounce. On the options front, the highest call open interest was at the INR 100,000 strike price. The highest put open interest was at INR 90,000 strike for the Feb. 24 expiry contract.

The MCX Bulldex, an index that tracks the real-time performance of gold and silver futures on the MCX, was up 124 points at 19272 points. Until 1700 IST, the February and April gold contracts recorded turnover of INR 21.75 billion and INR 5.79 billion, respectively. The March and May silver contracts saw a turnover of INR 18.74 billion and INR 1.53 billion, respectively.

The spot gold-silver ratio, also known as the Mint ratio, fell to 87.87 on Thursday, indicating that gold had underperformed silver. The ratio measures the ounces of silver required to buy an ounce of gold. The ratio was 89.42 on Wednesday.

Outlook for the rest of the session:

--MCX gold seen at INR 78,550–INR 78,380 per 10 gm

--COMEX gold seen at $2,735.07–$2,772.37 an ounce

--MCX silver seen at INR 92,110-INR 94,560 per kg

--COMEX silver seen at $31.20-$32.48 an ounce

End

US$1 = INR 86.55

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Subhojit Sarkar

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