The gold rally continues. In India, on the Multi Commodity Exchange (MCX), gold for delivery in August contracts traded higher by over 1% to ₹34,810 per 10 gram. The gold for delivery in October contracts, too, rose by over 1% to ₹35,020 per 10 gram. In global markets, prices now have already hit six-year highs and some analysts bet that there could be some more upside left as rising bets on lower interest rates, a weaker dollar and confrontations between the US and countries including China and Iran catapulted prices to six-year highs. Globally, gold prices are already up 10% in four weeks, breaking above $1,400 an ounce for the first time since 2013.
1) Hareesh V, head of commodity research at Geojit Financial Services, says that the growing tensions in the Middle East and dovish comments from the major central banks have boosted the yellow metal’s safe haven appeal. The latest trigger for gold’s rally is US Federal Reserve’s signal that it may cut rates as early as next month to combat economic risks. The European Central Bank also said last week it would ease policy again if inflation fails to accelerate, echoing other central banks which have said they may cut rates to fend off economic slowdowns.
2) “A weak dollar, which plummeted to a three-month low on expectations of an imminent interest rate cut by the US Federal Reserve, also assisted the sentiments,” he added. Lower interest rates help gold by pushing down bond yields, reducing the opportunity cost of holding non-yielding bullion. They also tend to weaken the dollar, making dollar-priced gold more affordable for buyers with other currencies.