Gold price jumps 4% in one week on US Fed rate cut buzz. Opportunity to buy?

Gold rate today: The record run in gold prices continued throughout this week as expectations of the US Fed rate cut gained momentum after Jerome Powell's testimony before the US Congress. Spot gold price settled at a record high on Friday after briefly topping the $2,200 mark. On Multi Commodity Exchange (MCX), the gold rate finished at ₹66,019 per 10 gm mark, recording a weekly gain of ₹2,419 per 10 gm or nearly 4 percent appreciation in this time. Spot gold price finished at $2,179 per ounce level, logging around a 4.65 percent rise against the previous Friday's close of $2,082 per ounce level.

According to commodity market experts, gold prices rallied across bourses on US Fed rate cut buzz after Jerome Powell's testimony before the US Senate. However, concerns surrounding the global economic landscape, and rising geopolitical tension continue to drive demand for the precious metal.

Triggers for gold price rally

On reasons that fueled the gold price record run, Sugandha Sachdeva, Founder of SS WealthStreet (Formerly WealthWave Insights) said, "The surge in gold prices to historic levels, reaching ₹66,356 per 10 gm, and gaining close to 4 percent for the week, reflects a combination of several factors driving demand for the precious metal. Concerns surrounding the global economic landscape, geopolitical uncertainties, and evolving expectations of earlier interest rate cuts have all contributed positively to gold prices."

"On Friday, Comex gold price for April 2024 delivery touched the 2,200 level for the first time and climbed to a new peak of $2,202.35 per ounce after the rise in US unemployment data. After the news of a rise in the US unemployment rate, buzz for early US Fed rate cut gained momentum that triggered profit-booking in the currency and bond markets," said Anuj Gupta, Head — Commodity & Currency at HDFC Securities.

Anuj Gupta of HDFC Securities went on to add that the US Fed rate cut buzz has put US dollar rates under pressure as the US dollar index has slipped below the 103 level.

Gold price outlook

Expecting a pause in gold price rally, Sugandha Sachdeva said, "Despite this significant rally, there are potential risks that could temper the upward momentum. One such risk is the robust US jobs report for February, which exceeded expectations with the addition of 2,75,000 jobs that could delay potential interest rate cuts by the US central bank. While this may indicate a strong economy, revisions lower for job gains in January and December indicate a cooling job market and have increased the likelihood of a cut in interest rates eventually. Lower borrowing costs typically boost gold prices as they reduce the opportunity cost of holding the metal."

"In terms of the price outlook, the recent rapid increase in gold prices may be seen as slightly overstretched, suggesting the possibility of an intermittent correction. In the international markets too, gold has tested highs close to the crucial $2200 per ounce mark hurdle, from where we may witness some profit booking. However, despite these short-term fluctuations, the overall outlook for gold remains positive. Market participants should view dips as buying opportunities," Sugandha added.

Factors that may dictate gold price movement

On triggers that may dictate gold price movement in the near term, Sughandha Sachdeva said, "Looking ahead, the focus will be on the latest US inflation data, which will provide insights into the trajectory of US interest rates and could further influence gold prices. Overall, while short-term corrections are possible, the underlying factors driving gold demand remain intact, supporting a positive outlook for the precious metal."

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