Market Absorbs US Rate Hike By 75bps, Gold Bounces Back To $1860/oz Globally

The US central bank, Federal Reserve has recently raised its interest rate by 75bps, which was a much-expected step. As a result, gold and silver rates started to fall in the global markets and Indian domestic markets immediately. However, in the past two days, gold markets have bounced back again.

Gold rates

Yesterday gold rates in the Comex futures closed at $1849.90/oz, and today, it is fetching $1846.50/oz, till last traded. Earlier, after the interest rate hike, gold rates fell to around $1820/oz in the Comex futures. In India, today 22 carat gold rate is quoted at around Rs. 4775/10 grams, and 24 carat gold rate is quoted around Rs. 5210/10 grams. Only a fall can increase the retail gold demands in India, which is under pressure now.

To control the 41 years high headline inflation level at 8.6% YoY gain in the last month, US Fed has hiked the interest rate by 75bps. The inflation rate has also gained on a month-on-month basis. Investors in the gold market were worried about it. But, this mounting inflation rate is also triggering the investors and traders, so the gold market could bounce back strongly globally. According to a Bloomberg report, "Soaring prices are hurting Americans, and the cure is going to hurt, too. It may take a recession to stamp out inflation, and it's likely to happen on President Joe Biden's watch. According to estimates by Bloomberg Economics, a downturn by the start of 2024 is now close to a three-in-four probability, which is bad news for Biden if he wants a second term."

Price Estimation

Stating a price estimation, analyst Jim Wyckoff told Kitco News, "Technically, the August gold futures bears still have the firm overall near-term technical advantage. Bulls' next upside price objective is to produce a close in June futures above solid resistance at this week's high of $1,882.50. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,800.00."

Hedge against inflation

Gold is considered a hedge against inflation, and pointing out to that, many analysts are expecting a rise in gold price further, in case the inflation rate does not come down sharply. Inflation is o more a temporary concern, it is rather climbing up sharply, dragging the economic growth and equities down. US Dollar index and US bond yields on the other hand are increasing.

The spot gold prices were last quoted at $1845.90/oz, falling by 0.69%, from the last trading day. The US dollar index in the spot market stood at 104.20, surging by 0.31%. In India, the Mumbai Commodity Exchange (MCX) gold in August future was quoted at Rs. 50,975/10 grams, falling by 0.02%, from the last trading day.