Gold Rates Rising In International Markets To 8 Weeks High In The First Week Of November: See Why

Fed FOMC meet's impact on gold rates

At the end of the earlier month, it was anticipated that gold rates might fall from November marginally. In the USA, Federal Reserve, the central bank was scheduled to organize their FOMC meeting on November 2 and 3, to decide their upcoming monetary policy. As expected, Fed Chairman Jerome Powell announced tapering of their monthly asset purchase program by $15 billion per month. So, this will make government bond yield more lucrative, and as asset gold rates were expected to fall.

US non-farm payroll data

In the USA, non-farm payrolls have increased at 531,000 in October, which is above the consensus anticipation of 450,000. Additionally, the unemployment rate has dropped to 4.6%, down from 4.8% in September. So, the Fed has realized that the country's economy is recovering. So, the gold rate should fall marginally. But the present trend of the gold rate has denied other textbook theories, and still increasing daily, as inflation is the biggest concern now.

Inflation-sensitive gold rates

As an immediate reaction to the tapering announcement, gold rates fell to $1763/oz. However, this trend did not linger for a longer period in the international market, and in India, even after the non-farm payroll data. Yesterday, on the last trading day, on November 5, gold rates again hiked to $1816.8/oz, increasing by 1.30%, crossing 8 weeks high levels. The reason behind this change is inflation. The Fed's officials are trying to keep the inflation rates around 2%, but the present inflation rate is standing at a 30 years high level. So, investors are worried about it. Gold is a hedge against inflation, and investors are inclining to stay under the shelter of gold. So, gold rates are now expected to hike till inflation does not come under control.

Upcoming gold price anticipation

Gold rates anticipations are in a mixed bag now. The USA's inflation was thought of as transitory before, but now the situation has gone to a position of stagflation. So, the gold rates expectations are mostly bullish now. But if the Federal Reserve hikes the interest rate to control inflation, then only common buyers can expect a fall in the gold price. Gold rates can hike to $2000/oz level according to analysts if the inflation rises, else, gold rates can fall to $1700/oz in case of the interest rate hike. At present, 22 carat gold rate in India is quoted at Rs. 46,210/10 grams and 24 carat gold rate is quoted at Rs. 47,210/10 grams.