Gold Prices Are Rising Now, But Having Mixed Bag Of Expectations

Indian gold price range

In September, 22 carat gold prices in India closed at Rs. 44,494/10 grams, while 24 carat gold price closed at Rs. 45,490/10 grams. This range impacted the Indian gold prices directly. So, in September, in India, 22 carat gold rates fell by 4.08%, which has been worrying for gold jewellers and traders. But in October, globally, gold rates experienced a considerable hike. Concerns related to inflation forced investors to take shelter under the precious metal. In October, 22 carat gold rate started with Rs. 45,470/10 grams on October 1. With a significant hike, on October 30, 22 carat gold rates are quoted at Rs. 46,740/10 grams and 24 carat gold rates are quoted at Rs. 47,740/10 grams. This month has been a positive time for the gold market, during the start of the festive season, when Indian are waiting for Diwali and Dhanteras.

International gold price range

In the global markets, in September gold prices fell below $1700/oz. Now, in the international futures markets and the spot market gold went above the psychological high level of $1800/oz multiple days at the end of October. However, gold rates fell below that level marginally at last. Friday, October 29, was the last trading day of the month, in the Comex December gold futures, the rate closed at $1783.9/oz with a 1.04% drop. Similarly, on the spot market, the gold rate closed at $1785.1/oz with a 0.83% drop. However, even on that day gold rate reached at $1802.4/oz level at some point in time. So, this month's range has certainly been far more positive than September's range. According to analysts, the support price for gold for the next year is being considered at $1600/oz.

Gold rate expectations

Gold rate in the international market at present is staying around $1800/oz level, but expectations about the upcoming prices are showing a constellation of opinions. 

Edward Moya, OANDA senior market analyst told Kitco News, "With the 10-year Treasury yield looking at a move towards 1.60%, gold is on thin ice. The $1,700 level seems imminent for bullion, with many traders eyeing the March lows ahead of $1,670 as critical support. The reset of inflation expectations has not benefited gold prices at all, in fact, it has been the primary driver for Treasury yields. However, Moya added, "If gold can show signs of stabilizing, then longer-term investors will return and bet on the 2022 global economic recovery that will ultimately lead to a weaker dollar." If the gold rates drop below the $1700/oz level globally, then Indian gold businesses will suffer. 

On the other hand, Motilal Oswal has anticipated that the gold rate is expected to increase to Rs. 52000-53000/10 grams in India, over the next 12-months. It will only be possible if the gold rates in the international markets reach around the $1900/oz level. So gold rates are having a mixed bag of expectations now.

US Fed meet in November

Above all the anticipation, at the present moment, the gold market is waiting for the US Federal Reserve's comment in the first week of November, after their monetary policy meeting. The US Fed is expected to start tapering from December, this year. Tapering is reducing the liquidity infusion in the economy. And not just US Fed, but central banks of the European countries are also trying to reduce the volume of liquidity infusion, as they are having economic recovery signals. So, the gold rates can fall at that time as the US Government bonds will be better, and lucrative for investors then. But the US is not going to hike the interest rate soon, so that will be a positive support for gold, globally. 

'Hyperinflation'?

At last, the most important factor, behind the gold rates' ups and downs, inflation, should be discussed thoroughly to anticipate the gold price range. The only reason, gold rates have seen correction in October, is inflation. Earlier, the US was expected to have transitory inflation, but, eventually, it is now being called 'stagflation'. That means inflation is being stagnant at present. However, recently, Jack Dorsey, CEO of Twitter, Tweeted, "Hyperinflation is going to change everything. It's happening." However, if 'Hyperinflation' is not probably the correct word to use as that will require the consumer goods prices to increase by at least 50% a month, or 12,874% a year. 

Inflation at present

At present, US inflation is at about 5.4%. Dorsey thinks inflation can reach 15%. Whatever the case is, if the inflation continues at that level or appreciates, the gold rates are certain to rise again globally, considering the interest rate is not being increased. However, if the US Fed hike the interest rate to control inflation, then gold prices might fall. So, analysts are being patient at the moment and waiting for a timely US Fed address to anticipate the market. However, a falling gold rate will help common Indian buyers to consumer more gold in the upcoming days. The World Gold Council in a recent report has also mentioned that gold jewellery demands in India have hiked by 60% in Q3. So, that is a positive tone for the gold business.