A weak US dollar and safe-haven demand sent gold prices sharply higher today in global markets, including India. Spot gold rose 1.1% at $1,433.50 per ounce, the highest in a week. Back in India, on MCX, gold futures for August delivery were up 1.1% to ₹34,416. Similarly, the October futures contracts were trading 1.13% higher at ₹34,637. On Monday, gold prices suffered their biggest one-day fall in many years after US-China reached a trade truce. But since then gold prices have bounced back, driven by expectations of monetary easing from central banks amid global slowdown fears.
The latest triggers for gold prices have been signs of fresh strains on the global economy that may prompt stimulus from central banks. The US has added more products from the EU to a list of goods it could hit with retaliatory tariffs while recent data showed manufacturing activity cooling in the US. Factory data readings also showed shrinking activity across much of Europe and Asia in June.
“Bullion prices traded higher, with international spot gold prices traded above $1,430. Gold prices rallied on safe-haven buying with investors sighting economic growth concerns. The US 10-year bond yields fell to 2-year lows supporting gold buying.” HDFC Securities Senior Analyst (Commodities) Tapan Patel said.
Rising gold prices and the prospect of lower rates have encouraged investors to expand their holdings in the metal on prospects for further global monetary easing.
Gold prices also got a boost after US President Donald Trump announced the names of two nominees to fill vacant posts on the Federal Reserve Board who are seen to support his call for lower interest rates. Both nominees however must be confirmed by the US Senate.
Despite the US-China agreeing on a trade truce, some analysts are still betting that the US central bank would cut interest rate next month. Lower interest rates in the US decreases the opportunity cost of holding non-yielding bullion and weigh on the dollar, making gold cheaper for investors holding other currencies.
Analysts are also raising their bets that Bank of England would also lower interest rate after comments from Bank of England Governor Mark Carney, who said that a global trade war and a no-deal Brexit were growing risks to Britain’s economy which might need more help to cope with a downturn.
Back in India, domestic gold demand moderated demand in June as prices jumped to record high, Reuters reported. Analysts say that a drop in gold imports by India, the world’s second-biggest consumer of the precious metal, could weigh on global prices.