Gold prices fall amid hawkish US Fed cues

Gold prices have softened on Thursday after hitting a nine-month high which will accelerate wedding season gold demand. In the spot market, the highest purity gold was selling below Rs 54,000 per 10 gram mark

Colin Shah, MD. Kama Jewelry said “Gold prices slipped below the $1800 mark briefly, in the domestic market it is trading below the Rs 54,000/10 gm mark. Gold prices have softened due to the policy action by the Us Fed. On expected lines, the US Fed hiked rates by 50 bps. This is the 7th straight rate hike by the US Central bank. This has taken rates to a 15-year high in the US, thereby leading to the dollar strengthening. Though the rate hike was factored in by the market, the hawkish commentary by the Fed was a surprise. The Fed indicated more rate hikes as it is committed to meeting its 2% inflation target, at the cost of economic growth and the job market.

The ECB and BoE are also expected to hike rates, thereby reducing investors’ interest in gold. “We expect gold prices to trade sideways till H1CY23. Festive demand and global central banks pausing their rate-tightening policy will push demand for gold in H2CY23. However, the escalation of geopolitical tensions and recession in the West may change the price trajectory for gold,” Shah added.

M. P. Ahammed, chairman, Malabar Group said
Gold being an integral part of the socio-economic fabric of the country, the consumers in India have historically been showing price tolerance while purchasing gold. The enhanced safe haven status of the yellow metal on the back of geopolitical tensions, interest rate increase by the central bank and inflationary pressure has further strengthened consumer sentiment towards gold. Given the fact that the economy is reviving and pent-up demand is driving gold jewellery buying in the ongoing wedding season, the overall demand upside outweighs the upward price movement of gold. During the October-December 2022 period covering the festive and wedding season, we expect 10 – 12% rise in sales in gold jewellery compared to the same period last year. The consumer demand outlook looks robust. Consumers nowadays factor in the gold price movement while planning near-term or future purchases of gold jewellery for investment and adornment”.

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