US Fed Interest Rate Outcome Key To Gold Price Movement

The US Federal Reserve is likely to take a decision on interest rates later on Wednesday. As we all know that rising interest rates is not good news for gold. A status-quo on interest rates by the US Fed could further fuel a rally in gold.

However, investors seem to have discounted the interest rate bit and are looking to gold as a safe haven against risks, following the banking meltdown.

Gold in the global markets has now peaked at $1986 an ounce and is fast moving towards the $2000 an ounce. The banking crises at SVB, Signature Bank and Credit Suisse saw investors take shelter in gold as a safe haven asset, pushing gold prices higher.

In India, gold prices have also risen over the last few months by a falling rupee. Remember that each time the rupee falls against the US Dollar gold prices move higher. The rupee has seen constant weakness over the last few quarters.

Gold prices in India have now crossed the Rs 60,000 mark for 22k. "Gold prices have risen almost 7-8% in the past month. The rally in the yellow metal is primarily due to the banking crisis in the west. The liquidity infused by the central banks and the expectations of lower to no rate hikes is pushing gold prices up. Gold is a safe haven, historically it has gained in periods of uncertainty," says Colin Shah, the MD, Kama Jewelry.

According to him, the current situation globally may take some time to clear out. "Globally, central banks have been adding gold reserves. The onset of the festive season in India starting from Gudi Padva will support demand at the retail level. We expect gold to gain further and touch new highs in the next few months. Domestically, it is expected to trade in the range of Rs 61,000-62,000/ 10gm. Internationally, it may scale levels of $2,050-2100/oz," he says.