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Informist, Friday, Sep 20, 2024

 

By Ashutosh Pati

 

MUMBAI – Gold prices are set to rise 4-6% on the Multi Commodity Exchange of India by the end of the year, supported by the US Federal Reserve's interest rate cut on Wednesday and the possibility of additional rate cuts in the near future, analysts said. On the COMEX, experts believe prices will increase by around 5% by the end of the year.

 

There may be some profit-taking in the short term, but the momentum will be positive in the longer term, they said.

 

The US Federal Open Market Committee cut the federal funds target range by 50 basis points to 4.75-5.00% at its meeting this month on the back of easing inflation and a weaker labour market. "The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate," the US Federal Reserve's policy release said. 

 

According to the summary of economic projections, released late Wednesday, nine out of 19 Federal Open Market Committee officials expect a further 50-bps rate cut to 4.25-4.50% by the end of the year, and seven expect a 25-bps cut in the policy rate. A minority of two officials expect the Federal funds rate to remain unchanged from current levels until the end of 2024.

 

"We are expecting gold prices to reach around $2,750 per oz in the international market by the end of the year," Manoj Jain, director, Prithvi Finmart, said. On the domestic exchange, he said, prices might reach around 76,500 rupees per 10 gm. "The 50-bps interest rate cut was in line with expectations of the market. We are also expecting further 25-bps rate cuts each in the Fed's November and December meetings," Jain said. Lower interest rates reduce the opportunity cost of holding the non-yielding precious metal. 

 

The CME Group's FedWatch tool shows that the probability of a 25-bps interest rate cut by the US Federal Reserve in November is 67% and the odds of a 50-bps rate cut are 33%. 

 

Ajay Kedia, director, Kedia Advisory, expects prices of the yellow metal to reach $2,740 per oz on the COMEX and around 78,000 rupees per 10 gm on the Multi Commodity Exchange of India by the end of the year.

 

The December gold contract on the COMEX rose 1.3% from its previous close to a new high of $2,626.60 per oz on Wednesday following the rate cut announcement. On the domestic exchange, the October gold contract rose nearly 1% from its previous close to 73,620 rupees per 10 gm on Thursday.

 

At the time of writing, the most active December gold contract on the COMEX was at $2,619 per oz, up 0.2% from its previous close. The most active October gold contract on the MCX was at 73,511 rupees per 10 gm, up 0.1% from its previous close.

 

Kedia expects prices of gold on the domestic exchange to be around 72,200 rupees per 10 gm in the short term because of profit-booking. He believes prices of gold will hover around $2,600 per oz on the COMEX for a week. 

 

Jain expects gold prices on the domestic exchange to go up to 74,000 rupees per 10 gm in a month, where there is "strong resistance". On the COMEX, he sees gold prices going up to $2,650 per oz.  End

 

US$1 = 83.48 rupees

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

 

Edited by Namrata Rao

 

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