Why gold rates today jumped to highest in 3 weeks

Gold and silver prices today edged higher in Indian markets after the US Federal Reserve signaled that it may slow the pace of interest rate increases in the future which pushed the dollar and pushed Treasury yields lower. On MCX, gold futures were up 0.55% to near 3-week high of ₹51,000 per 10 gram while silver rose 2.5% to ₹56224 per kg. In global markets, the yellow metal had surged 1% in the previous session and was trading near $1,735.77 per ounce today. 

Among other precious metals, spot silver gained 0.5% to $19.22 per ounce while platinum rose 0.1% to $887.49.

Overnight, the Fed raised rates by 75 basis points and chairperson Jerome Powell said while a similar move was possible again but the pace of hikes could slow at some point.

The Fed's signal pushed the dollar index today to near a three-week low, making greenback-denominated gold less expensive for other currency holders. Lower benchmark U.S. Treasury yields, which fell to hover near two-month lows, also supported bullion. Lower bond yields reduce the opportunity cost of holding non-interest bearing gold.

“Gold and silver prices extended their gains into the electronic trading session after the Federal Reserve's decision to hike interest rates as expected. The dollar index reacted negatively after the Federal Reserve meeting outcome and slipped below 106.40 and supported both precious metals,” said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.

Gold has support at $1728-1717, while resistance is at $1748-1761 while silver has support at $19.02-18.80 and resistance is at $19.40-19.62, he said. 

In rupee terms “gold has support at ₹50,650–50,420, while resistance is at ₹51,060–51,240. Silver has support at Rs54,750-54,350, while resistance is at ₹55,780–56,210,” he added. 

Gold traders would be focusing now on the US GDP data for the second quarter that will provide further cues about the health of the economy amid growing chatter about the prospects of a recession.

"COMEX gold has been supported by weakness in US dollar and bond yields post Fed decision. Fed raised interest rate in line with expectations and reaffirmed its priority to get inflation under control. Market players however cheered comments from Fed Chairman that the pace of hikes will slow at some point and the Fed will set policy meeting-by-meeting," said Ravindra Rao, VP- Head Commodity Research at Kotak Securities.

“There is no major change in Fed’s stance but the open ended approach means we may see continuing volatility as market players may assess economic data to determine next move. Gold has edged up after a consolidation near $1700/oz level which shows that the momentum has turned positive however a sustained rise is still difficult as Fed is not likely to slow down any time soon,” he added. (With Agency Inputs)