The price of gold has gone up on both domestic and foreign markets following the US Federal Reserve’s most recent meeting and its hint to possible rate reduction in 2024. The Multi Commodity Exchange (MCX) gold futures contract for April 2024 saw an impressive gain on Thursday morning trades. It opened higher at ₹66,100 per 10 gm and reached an intraday high of ₹66,943 per 10 gm. The increase set a new all-time high for domestic MCX gold rates. Meanwhile, spot gold prices surged beyond $2,200 per ounce on the global market. They are currently trading at about $2,206 per ounce, having briefly touched $2,222 per ounce.
The Reasons for the Intense Increase in Gold Prices
Anuj Gupta, Head of Commodity & Currency at HDFC Securities, believes that the US Federal Reserve’s announcement of three possible rate cuts in 2024 is the main cause of the recent spike in gold prices. To elucidate further, Praveen Singh, Associate VP of Fundamental Currencies and Commodities at Sharekhan by BNP Paribas, pointed out that the markets were relieved to see that the Fed’s dot plot preserved the potential of three rate decreases. The optimistic attitude surrounding gold was fueled by the Federal Open Market Committee’s (FOMC) dovish posture and Chair Powell’s comments that rate cuts were not exclusively dependent on robust hiring.
According to Gupta, MCX gold prices would likely continue to rise in the near future, possibly reaching a level of ₹67,500 per 10 grams. In the event of a large market fall, he counsels investors to buy on dips and to keep a stop loss below ₹65,800 per 10 gram level. Gupta expects spot gold prices to hit $2,250 per ounce on an international scale, with $2,230 per ounce being the immediate aim.
Outlook for Investing: Should I Buy Gold?
Since rate cuts are likely to occur in the near future, gold is predicted to maintain its strong price throughout 2024. Gold has historically been a dependable insurance against inflation. With the world’s economy growing slowly, geopolitical unrest, and many elections, investors are turning more and more to safe havens like gold. With a compound annual growth rate (CAGR) of 12% over the previous two decades, 10.3% over the previous 15 years, and 7.5% over the most recent ten years, the metal has shown remarkable returns throughout time. With these things in mind, adding gold to your investing portfolio might be wise.
How Gold Prices Are Affected by Crude Oil
Anuj Gupta predicts that, in the immediate wake of the US Federal Reserve meeting, the price of crude oil may have a big impact on the direction of gold prices. The rising price of crude oil may increase the demand for precious metals like gold due to the possible inflationary pressures it poses. Investors keeping an eye on market fluctuations will therefore probably continue to focus on the relationship between crude oil prices and gold.
Ultimately, anticipation over potential rate cuts by the US Federal Reserve has caused gold prices to spike recently, which further confirms the metal’s reputation as a safe haven asset amid difficult economic times. The historical performance of gold and its position as an inflation hedge should continue to bolster its appeal as investors navigate changing market conditions and look for safe haven investments.
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