Price of Gold and Silver
On Friday, the glimmer of gold and Silver on the Multi Commodity Exchange (MCX) began at Rs 62,464 for 10 grams, only to dim momentarily with an intraday dip to Rs 62,404, while across international markets, its allure held firm at $2,033.33 per troy ounce.
Meanwhile, the shimmering allure of silver was unveiled on the MCX at Rs 71,050 per kg, briefly dimming to an intraday low of Rs 70,822, while maintaining its global appeal with a price hovering around $22.56 per troy ounce in international markets.
According to Anuj Gupta, the Chief of Commodity and Currency at HDFC Securities, gold prices remained unchanged at 62443 levels, while silver prices saw a recovery and increased by 0.75% to close at 70837 levels. The lower level buying and weakness in the dollar provided support to the bullion market. However, there are currently no significant factors in the market that are restricting major movements in gold and silver. Gupta predicts that gold may trade between 62200 and 62600 levels, while silver may trade between 70000 and 72000 levels.
On the other hand, Manav Modi, an Analyst at MOFSL specializing in Commodity and Currency, stated that gold traded steadily after a slight decrease in the previous session due to better than expected US labor data. However, the decline in the dollar and yields limited some of the losses in the market.
The decline in bullion occurred following strong economic data from the United States and numerous comments from the Federal Reserve, which led to a significant reduction in expectations for early interest rate cuts in 2021. Currently, traders are estimating a 61% likelihood of an interest rate cut by the Fed in May. Nevertheless, there is also a growing anticipation for a rate cut in June, which has sparked discussions about the timing of the first rate cut in 2024. Throughout this week, various Federal Reserve speakers provided conflicting remarks about the pace of interest rate cuts, causing uncertainty among market participants.
According to Modi, the rise in the dollar, reaching its peak in three months, also had a negative impact on bullion prices. Nevertheless, the greenback witnessed a substantial period of consolidation throughout this week. The decline in applications for US unemployment benefits highlights the economy’s ability to withstand higher interest rates. It is anticipated that volatility today will be somewhat lower due to the absence of major economic data points on the calendar.
Reserves held by the central bank.
Central banks maintain reserves consisting of paper currencies and gold. As central banks opt to diversify their monetary reserves by shifting away from paper currencies and increasing their holdings of gold, it is common for the price of gold to experience an upward trend. Numerous nations across the globe possess reserves that are predominantly composed of gold.
The worth of the U.S. Dollar
The value of the U.S. dollar typically has an inverse correlation with the price of gold due to its denomination in dollars. Assuming all other factors remain constant, a stronger U.S. dollar usually exerts downward pressure on the price of gold, ensuring greater control. Conversely, a weaker U.S. dollar is expected to stimulate higher demand for gold, leading to an increase in its price as more gold can be acquired when the dollar is weaker.
Global Jewelry and Industrial Demand
The World Gold Council reports that jewelry accounted for roughly 44% of the overall gold demand in the first half of 2022. Notably, India, China, and the United States stand out as major consumers of gold for jewelry purposes, considering the volume involved. Furthermore, about 7.5% of the demand is attributed to the utilization of gold in technology and industrial sectors, particularly in the manufacturing of medical devices like stents and precision electronics such as GPS units.