The last few interest rate hikes by the US Federal Reserve have bottomed gold prices globally. Investors are worried that the yellow metal is losing its significance as a safe haven, as the US dollar is gaining strength consistently. With the mounting inflation rate, the major central banks are being forced to hike the interest rates, which is again dragging down the gold prices, pushing the bond yields higher. However, today's spur in the US Dollar index crashed the Comex gold futures price to as low as US$ 1,628.50/oz.
Eventually, the Indian gold price on September 26, is also trading flat. The 22 carat gold rates quoted at Rs. 46,000, and the 24 carat gold rates quoted at Rs. 50,200/10 grams. Ahead of the festive season, it is good news for retail buyers that they can buy gold at lower prices, for high long-term returns.
Meanwhile, the World Bank is pointing toward a possible recession, which is favorable for the US Dollar index. Gold is a Dollar dominated asset class, and it is one of the major reasons, gold rates are falling continuously now. "Global growth is slowing sharply, with further slowing likely as more countries fall into recession" commented World Bank Group President David Malpass.
Additionally, World Bank mentioned in a report, "Investors expect central banks to raise global monetary-policy rates to almost 4 percent through 2023-an increase of more than 2 percentage points over their 2021 average. Unless supply disruptions and labor-market pressures subside, those interest-rate increases could leave the global core inflation rate (excluding energy) at about 5 percent in 2023-nearly double the five-year average before the pandemic," It has helped the US Dollar index to spur today to a fresh 20-year high level at 114.53, pulling the commodity markets down.
"A slowdown-such that the one now underway-typically calls for countercyclical policy to support activity. However, the threat of inflation and limited fiscal space are spurring policy-makers in many countries to withdraw policy support even as the global economy slows sharply," the World Bank report added.