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Gold price above ₹49,000, further rally possible experts say
The rise in the yellow metal has been on account of the fall in US Treasury yields, softer US dollar which pushes up the gold prices, said an expert.
Prices of gold and silver rose on Wednesday as they tracked international markets with gold futures up 0.4% to ₹49,049 per 10 gram and silver rising 0.7% to ₹72,622 per kilogram on the Multi Commodity Exchange (MCX). Gold rose 0.62% and silver gained 0.51% in the previous session.
“Gold prices have been steadily rising in the past few sessions tracking international gold futures prices. The rally in the yellow metal continued past ₹49,000/10gm earlier today to make a 4-month high,” Nish Bhatt, founder and CEO of investment consulting firm Millwood Kane International, said.
“The rise in the yellow metal has been on account of the fall in US Treasury yields, softer US dollar which pushes up the gold prices. The commentary by the US Fed on rising inflation has also helped gold prices. The dollar index is currently over a 4-month low. The current scenario combined with the rising number of cases due to the second wave will lead to investors turning to a safe haven and help further rally in gold prices,” Bhatt added.
“The yellow metal has continued to show strength and the safe-haven demand will remain intact in general. While DXY is struggling to extend recovery moves. MCX gold has hit the higher end of the range around ₹49,000, further upside is possible only if prices hold on to these areas for few sessions. Else a correction towards ₹48,000/ ₹47,500 should be seen,” Rahul Gupta of Emkay Global Financial Services added.
Gold price hit a near-year low of about ₹44,000 per 10 gram in March. Gold rates are still down significantly from last year's high of ₹56,200 despite the recent recovery in prices.
According to Reuters, international gold prices rose above the key psychological level of $1,900 per ounce on Wednesday over a weaker dollar and growing inflation concerns after Federal Reserve officials maintained a dovish stance over rates. Spot gold was up 0.3% to $1,904.50 per ounce by 0647 GMT, its highest level since January 8, and US gold futures gained 0.4% to $1,905.40 per ounce, the report said.
"A weaker dollar is helping and growing inflation risks are outweighing everything right now. This is about hedge against inflation right now," Stephen Innes, managing partner at SPI Asset Management, was quoted as saying by Reuters. "Even if inflation is high, they're (the Fed) going to be very, very dovish. What really matters for gold is front-end real rates. The Feds will continue to keep front-end rates low, which is going to weaken the dollar and gold is going to do quite well,” Innes added.
The dollar index was pinned near a 4-1/2-month low against its rivals, making gold cheaper for other currency holders. Benchmark US Treasury yields were hovering near a two-week low, reducing the opportunity cost of holding non-interest bearing gold.
(With agency inputs)
