Gold price climbs to six-week high on rising optimism for US Fed rate cut. US dollar rate in focus

Gold rate today: Because of rising optimism for the US Fed rate cut and weakness in the US dollar rates, gold price in the international market scaled to a six-week high at the $2,391 per ounce mark. In the domestic market, gold futures contract on the Multi Commodity Exchange (MCX) for the August 2024 expiry, regained the psychological ₹73,000 mark by logging around 2 percent weekly gain in the past week. On Friday's dealings, MCX's gold rate surged ₹671 per 10 gm and finished at the ₹73,038 mark. Following weakness in the US dollar rate, silver prices ascended to a four-week high and ended at $31.20 per ounce in the international market.

According to the commodity market experts, the gold rate today is in an uptrend as the highly anticipated US Fed rate cut in the upcoming US Fed meeting has weakened the US dollar rate in the forex market. A US Fed rate cut typically leads to a weaker US dollar rate, making gold more attractive to investors. They said that easing US inflation concerns after better-than-expected US job data and US core PCE index data logging the lowest annualized increase in more than three years, have further aided the gold price rally in the recent sessions.

Triggers for gold price rally

On reasons fueling gold prices today, Anuj Gupta, Head of Commodity & Currency at HDFC Securities, said, “Gold prices in the international market have climbed to a six-week high whereas the silver rates in the international market touched a four-week high. This could happen as easing US inflation concerns has boosted the US Fed rate cut buzz. This rising optimism for the US Fed rate cut put pressure on the US dollar rate in the Forex market, and the US dollar index slipped below the 105 mark.”

Kaynat Chainwala, AVP-Commodity Research at Kotak Securities said, “Comex Gold extends gains amid rising bets that the Federal Reserve will trim interest rates before year-end after poor US economic data. Swaps traders are now pricing in a 70% chance of a rate cut in September. Now, all eyes on the key US jobs numbers today as it is expected to show decline in hiring and a moderation in wage growth.” 

“As per Bloomberg estimates, US Nonfarm Payrolls probably rose by 190,000 last month, Unemployment was seen holding at 4%, the highest in more than two years. If official data meets expectations, it may strengthen the case for the Fed to start cutting interest rates as soon as September and boost further upisde in gold prices,” Kotak Securities expert said.

Pointing towards other triggers that are fueling gold rates today, Sugandha Sachdeva, Founder of SS WealthStreet, said, “ Gold prices advanced by more than 2 percent in the week gone by as rising optimism for an interest rate cut by the US Federal Reserve sooner than previously anticipated, weakened the dollar index and acted as a catalyst for a strong rebound in gold prices. The recent US core PCE index data, a key inflation gauge, logged its lowest annualized increase over three years. This indicated ebbing economic price pressures and increased the likelihood that the US central bank will start lowering interest rates at its September meeting.”

The SS WealthStreet expert said that gold prices got an additional boost towards the end of the week, as the US economy added 206,000 jobs in June, surpassing expectations. However, unemployment rose to 4.1%, the highest since November 2021, while wage growth cooled. Besides, the job gains for April and May were revised lower, indicating a cooling labour market and decelerating inflation, leading to a further slide in the dollar index and enticing buying interest in dollar-denominated gold.

Gold price today: Important levels to watch

"Price structure suggests that the precious metal has found good support around Rs.70700 and then at ₹72,200 per 10 gm mark and looks to continue with the upward momentum towards ₹73,700 and ₹74,200 per 10 gm zone or around $2,420 per ounce mark in the coming days," Sugandha said.

Factors that may dictate gold price

Speaking on the immediate triggers that may dictate gold price in the near term, Sugandha Sachdeva said, “All eyes are now on the US Consumer Price Index (CPI) data for June, scheduled for release next week. This data will further influence the US central bank's rate-cut path and, consequently, gold prices. The CPI data will be critical in confirming whether inflation is indeed cooling, which would bolster the case for a rate cut and likely support higher gold prices.”

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