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Business News/ Markets / Commodities/  Gold price jumps from seven-month low after ease in US dollar, bond yield and crude oil rate

Gold price jumps from seven-month low after ease in US dollar, bond yield and crude oil rate

Gold rates today are in uptrend as ease in fear of US Fed rate hike has dragged US dollar, US bond yield and crude oil price, say commodity market experts

Prices of WTI crude oil price and Brent crude oil hit five-low in the week gone by that has eased fear of US Fed rate hike, say experts. (PTI)Premium
Prices of WTI crude oil price and Brent crude oil hit five-low in the week gone by that has eased fear of US Fed rate hike, say experts. (PTI)

Gold rate today: On account of ease in fear of US Fed rate hike, US dollar (USD) and US bond yield cooled down from record high levels in the week gone by. This helped gold prices rebound from seven-month low. Gold future contract on Multi Commodity Exchange (MCX) for December 2023 expiry ended on Friday at 56,898 per 10 gm levels. 

In international commodity market, spot gold price finished at $1,832.50 per ounce levels after inching close to its support range of $1,800 to $1,800 per ounce in first half of the week gone by. This rebound in the yellow metal price has triggered a buzz about gold prices bottoming out at around $1,810 levels and it is getting ready for fresh bull trend ahead of the festival season in domestic and international market.

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Reasons that pulled down gold prices

On reasons that dragged gold prices in domestic and international market, Sugandha Sachdeva, Executive Director & Chief Strategist at Acme Investment Advisors said, "Gold prices experienced a challenging week, enduring eight consecutive sessions of decline while reaching a seven-month low before showing signs of recovery towards the end of the week. The decline in the precious metal's value can be attributed to several factors, primarily the strengthening of the US dollar index and the surging US 10-year bond yields, which reached a 16-year high of 4.884 per cent. Bond yields have been surging amid the pronounced monetary policy tightening measures of the US Fed and the robust US economic data. Rising bond yields create headwinds for gold by increasing the opportunity cost of holding the metal and driving up the value of the dollar. Investors have been shifting their money from non-interest-bearing assets like gold to interest-bearing assets like bonds, as they seek better returns which has reduced the demand for gold, putting downward pressure on its price."

BSE to launch options on WTI crude oil, Brent crude oil futures contracts

Acme Investment Advisors expert went on to add that key indicators such as the upbeat US job openings data for September and the manufacturing Purchasing Managers' Index (PMI) have raised bets that the US will maintain elevated interest rates for an extended period. This sentiment resulted in a selloff in treasuries and a downward drift in gold prices.

Why US bond yield climbed to record high

On reason that fueled US bond yiled to 16-year high, Mahendra Luniya, Founder and Chairman at Vighnaharta Gold Ltd said, “Gold prices dipped recently due to the US accumulating over $2 trillion in debt in the past year, reaching $32.91 trillion. This prompts investors to favor US government bonds, attracted by their yields."

US Fed rate hike in focus

"A robust US jobs report for September, released later in the week, heightened expectations of another interest rate hike by the Fed at its November meeting. The US economy added a surprising 336,000 new jobs in September, nearly double the projected 170,000 job additions. However, a dip in hourly earnings for September suggested a slight moderation in wage pressures, leading to some softening of the dollar index and offering some support to the precious metal," Sugandha added.

Rupee ends flat at 83.25 against the US dollar after RBI policy

Pointing towards the buzz about ease in US Fed rate hike fear, Anuj Gupta, Head — Commodity & Currency at HDFC Securities said, "Profit booking in US dollar and US bond yhield can be attributed to the buzz about ease in fear of US Fed rate hike. This has happened due to descent in crude oil prices. Both Brent crude oil and WTI crude oil prices hit 5-week low in the week gone by that has eased the inflation pressure on the US central bank. Hence, market is expecting that US Fed may not raise interest rate in its November meeting."

Gold price outlook

"Despite the prevailing weakness in gold, it is worth noting that there is a solid support levels of around $1,800 to $1,810 per ounce. If this support holds on a closing basis, we could potentially witness a rebound in gold prices. At the domestic markets, a crucial support level is pegged at 56,100 per 10 gm, following the sharp price decline. Looking ahead to the upcoming week, buying interest looks likely in gold on minor price dips, with a focus on the aforementioned support level.

Bond yield posts biggest single-day jump in 17 months; What's fuelling the rise?

However, Anuj Gupta of HDFC Securities maintained that gold prices in international market will have to sustain above $1,880 per ounce levels for a fresh set of bull trend.

"In my opinion, evey rebound in gold prices are relief rally until and unless it breaches $1,880 per ounce levels decisively in the spot market and on MCX it gives a breakout above 57,500 per 10 gm on closing basis," said Anuj Gupta.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

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Asit Manohar
Chief Content Producer at Live Mint Digital Team
Catch all the Commodity News and Updates on Live Mint. Download The Mint News App to get Daily Market Updates & Live Business News.
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Published: 07 Oct 2023, 07:25 AM IST
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