Gold Price Back Above Rs. 45000 After US Federal Reserve Reinforces Dovish Stance

Gold prices in India gained in the futures market on the MCX mirroring trend in the international gold rates. On the MCX, at around 11:40 am gold futures contract for April delivery was up over 0.95 percent or Rs. 424 at Rs. 45264 per 10 gm. In contrast, silver futures jumped more sharply by 1.55% or Rs. 1043 to Rs. 68270 per kg.

The gains of close to 1% in gold futures come on the backdrop of softening dollar and treasury yield after the US Federal Reserve continued with its dovish stance and kept the interest rate steady. Also it stated that it would maintain benchmark rates close to zero through at least 2023.

As per a Reuters report soft gold gained 0.5% to $1,752.41 per ounce by 0119 GMT, while U.S. gold futures rose 1.3% to $1,748.80 per ounce.

The dollar index fell by 0.5% to 91.405. Meanwhile, yield on the benchmark 10-year treasury note softened from its highest level of 1.689% hit earlier in the session to 1.41%.

Lower interest rates render gold as an attractive investment as it reduces the opportunity cost of holding the non-interest yielding bullion.

On Wednesday, in its Fed meet outcome the US central bank indicated that it expects strong economic growth this year, fastest in nearly 40 years, but had no plan to hike key policy rates even though there is expected an increase in inflation.

"Gold trades higher amid correction in the US dollar index and bond yields on the back of Fed decision. Fed kept monetary policy unchanged as expected but played down risks from rising yields and indicated that interest may remain low until 2023. However, weighing on price is Fed's upbeat growth projection and continuing ETF outflows," said Ravindra Rao - Head - Commodity Research - Kotak Securities.

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