Home / Markets / Commodities /  US inflation to Fed's speech: 5 factors that may dominate gold price this week

Gold prices witnessed a bumpy ride and slipped to a 10-month low in international markets during the week, only to recover some lost ground towards the end of the week. The Fed’s tightening cycle amid elevated inflation readings and the sharp impulse in the dollar index towards fresh 20-year highs led to a steep decline in gold prices. On Multi Commodity Exchange (MCX) gold price fell from 51,950 to 50m810 per 10 gm level, logging 2.20 per cent loss during the week gone by.

According to experts, gold investors preferred the safe-haven dollar to gold and it breached the crucial resistance of 105.80, to march higher towards the 107.78 mark amid the non-stop chatter around the rate hikes by the key central banks. They said that factors like dollar index, US inflation data, US Fed's speech, etc. are expected to continue dictating gold price movement in near term.

"US inflation rose more than expected again in May, dashing hopes that the rise in the inflationary trend was plateauing off. The CPI rate rose by 1.0 per cent from April, taking the headline inflation to a new 40-year high of 8.6 per cent. The market expectation was around 8.3 per cent, with a monthly gain of only 0.7 per cent. This could pave the way for aggressive rate hikes by the US Fed going forward. This will drag the gold rates lower, until the next fed meet and commentary," said Pritam Patnaik, Head of Commodities — HNI and NRI Acquisitions at Axis Securities.

Here we list out top 5 factors that may dictate gold price this week:

1] Dollar index: "The first and the foremost dominating factor would be the movement of the dollar index. After last week’s dramatic rise, a continuation of this upwards momentum in the safe-haven currency would further pressurize gold prices, while a breather in the rally would turn out to be a positive trigger for gold prices," said Sugandha Sachdeva, Vice President — commodities & Currency Research at Religare Broking Ltd.

2] Crude oil price: "The movement of crude oil will remain crucial as the US and its allies are contemplating a proposal to cap the price of Russian oil between $40-$60 a barrel. US Treasury Secretary Janet Yellen is traveling to the Indo-pacific region next week and will seek support for capping the price of Russian oil," said Sugandha Sachdeva of Religare Broking.

3] US inflation data: "US inflation data for June 2022 is expected next week and it will impact the entire asset class that includes gold as well. A disappointing data is expected to trigger profit-booking in US dollar leading to sharp rise in gold and other assets across world. So, one needs to keep an eye on upcoming US inflation data," said Anuj Gupta, Vice President — Research at IIFL Securities.

4] US Fed's speech: American central bank officials' speeches is expected this week. There is buzz that Fed may tone down its hawkish stance on interest rate hike as previous hikes have failed to contain inflation. So, the speech is important as it will give a cue about what's coming out from the next US Fed meeting," said Anuj Gupta of IIFL Securities.

5] Rupee vs dollar: Rupee nosedived to record low in recent session as dollar index shot up to its two decades high last week. Indian dollar reserves too went down in the week ended 1st July 2022. So, movement of Indian National Rupee (INR) against the US dollar (USD) will one of the major domestic triggers for the precious yellow metal price.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

Asit Manohar
Chief Content Producer at Live Mint Digital Team
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